May 28, 2013
Job order costing
Approach that estimates costs for specific customer orders
because the orders may vary from customer to
- Each job will have a cost
that is computed by summing the direct and indirect costs of each department or activity that was used to
complete the job.
- Therefore averaged over a
small number of units
- Job 714:
cost rate= (120K+160K)/(8K+12K) = 14
- Indirect cost rate - Milling
= 120K/12K = 10
cost = 2263.2
- A: 2812.5
- A, less apparent cost means
less increase in price, more willing to increase demand.
is easier to do as well.
- Will use departmental cost
drive rates if the cutting department have a cause-and-effect relationship
with machine hours, while those in the grinding and drilling departments
have a cause-and effect relationship with direct labour hours.
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