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Unit 10: Job and Batch Costing

(iii) Job costing facilitates estimation of cost of similar jobs, Notes
(iv) It helps the management to know about the profitability of the jobs,

(v) Job costing is helpful to ascertain the cost as well as the profit or loss for each job
separately,
(vi) The data of the job costing are quite helpful for the future planning, and
(vii) Job costing helps in making detailed analysis of cost of materials, labour, direct expenses
and overheads.

Disadvantages

The disadvantages or weaknesses of job costing are as follows:
(i) It is expensive to operate as it requires considerable detailed official or clerical work,
(ii) With the increase in the official or clerical works the chances of errors or mistakes are
increased,
(iii) Job costing does not facilitate control of cost unless it is used with standard or budgetary
costing,

(iv) Job costing cannot be efficiently operated without highly developed production control
system. The job costing method requires intricate factory organisation system,
(v) To get accurate results, job costing requires some pre-requisites. In its absence job costing
will not give accurate results,
(vi) It is expensive as cost is accumulated and ascertained for each job separately, and
(vii) When drastic economic changes take place cost comparison becomes difficult.

10.2 Procedure of Job Costing

The procedure that is commonly applicable to a normal sale transaction equally applies in case of
job costing. The procedure for job costing involves the following:
(i) Receiving an Enquiry: First of all a customer seeks an enquiry about the price, quality and
other terms and conditions of the job before placing an order.
(ii) Estimation of the Price of the Job: The cost accountant estimates the cost of job after
considering the various elements of cost and keeping in mind the specification of customer.
This is based on the cost of execution of similar job in the past years and considering the
possible changes in the various elements of the cost. Estimated costs are also compared
with the actual costs to find out the variation in the actual profit.
(iii) Receiving of Order: The customer will then place the order if he is satisfied with the
quotation price, other terms and conditions of executing the job.
(iv) Job Order Number: When an order is received from the customer, it is allotted a certain
number. Every job order is known by its number throughout its production process.
(v) Production Order: When a job is accepted, the production planning department prepares
a production order or job order. production order or job order is a written order issued to
the manufacturing department to proceed with the job. A specimen of production order is
given:

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