Question

How are the costs of jobs calculated?

Answer 1

• The cost of jobs are calculated as:

#1: Direct material cost of material used for that job is added.

#2: Direct labor cost incurred is also added.

#3: Indirect material, Indirect Labor, Factory Overheads are then applied to the job on the basis of certain predetermined Overhead rate.

These are form cost of the job.

• Example: In Job 309, $ 20,000 direct material is used with $ 15,000 of direct labor cost. Overheads are applied at 150% of direct labor cost.

In the given case, Cost of the job will be:

A	Direct material cost	$            20,000.00
B	Direct Labor cost	$            15,000.00
C = B x 150%	Overheads applied	$            22,500.00
D = A+B+C	Cost of the job	$            57,500.00