Explain how job costing is used in service sectors and manufacturing sectors?
Q1. Explain how job costing is used in service sectors and manufacturing sectors? Provide examples by citing one job costing example of the service sector and one example of the manufacturing sector of a Saudi company to support your answers.
Q2. Axel Ltd. uses a process costing system for its sole processing department. There were 24,000 units in beginning WIP inventory for March and 216,000 units were started in March. The beginning WIP units were 75% complete and the 19,500 units in ending WIP were 60% complete. All materials are added at the start of processing.
Required:
a) Compute the no. of units started & completed.
b) Compute the EUP for DM and CC using FIFO and WA methods.
c) Calculate total manufacturing cost/EUP under both methods, if the following details are available:
|
|
FIFO |
WA |
|
Direct Material Cost |
SAR 700,000 |
SAR 910,000 |
|
Conversion Cost |
SAR 920,000 |
SAR 1,210,000 |
Q 3 DD Company has two departments, Dept. A and Dept. You are provided the following costs for five activities that occur at the manufacturing plant every month:
|
Activity |
Total Costs (SAR) |
Total number ofunits of Cost Driver |
|
Material handling |
315,000 |
450,000 parts |
|
Supervision of direct labor |
180,000 |
110 employees |
|
Janitorial and cleaning |
250,000 |
5,500 hours |
|
Machining |
350,000 |
8,500 machine hours |
|
Total costs |
1,095,000 |
The above activities are used by the two departments as follows:
|
Department A |
Department B |
|
|
Material handling |
220,000 parts |
230,000 parts |
|
Supervision of direct labor |
65employees |
45 employees |
|
Time spent cleaning |
2,500 hours |
3,000 hours |
|
Number of machine hours |
6,000 machine hours |
2,500 machine hours |
a. How much of the material handling cost will be allocated to Department A?
b. What is the ABC allocation rate for supervision of direct labor?
Q 4. T&T produces product ‘X’ as a part of its main product. Each year, the company produces 75,000 units of product ‘X’. The costs of production are mentioned below. An outside supplier has offered to deliver 75,000 units of product ‘X’ annually at a cost of $7.35 per unit. A fixed production cost of $ 120,000 is unavoidable for product ‘X’. Should T&T Co. make or buy product ‘X’?
The production costs per unit for manufacturing a unit of product B are:
|
Production Cost |
Amount ($) |
|
Direct Materials |
2.55 |
|
Direct Labor |
1.95 |
|
Variable Manufacturing Overhead |
1.20 |
Q5. “ABC is a costing method that allocates overhead and indirect costs to related products and services.” Comment on this statement and examine how ABC is used in the manufacturing sector with a suitable example.
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