CH4 - Job Order Costing

Tuesday, May 28, 2013

1:43 PM

Job order costing

Approach that estimates costs for specific customer orders because the orders may vary from customer to customer.

• 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

Problem 1

1. Job 714:

Indirect cost rate= (120K+160K)/(8K+12K) = 14

= 2250

1. Indirect cost rate - Milling = 120K/12K = 10

Total cost = 2263.2

1. A: 2812.5

B: 2998.34

1. A, less apparent cost means less increase in price, more willing to increase demand.

A is easier to do as well.

Problem 2

1. 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.

Problem 3

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