Question

Use the Strayer Library to research a career opportunity that requires managerial accounting and job costing skills. Describe the skills needed and select characteristics of the job that require job costing.

Support your rationale with examples and provide one academic resource.

Answer 1

Job costing involves the accumulation of the costs of materials, labor, and overhead for a specific job. This approach is an excellent tool for tracing specific costs to individual jobs and examining them to see if the costs can be reduced in later jobs. An alternative use is to see if any excess costs incurred can be billed to a customer.

Job costing is used to accumulate costs at a small-unit level. For example, job costing is appropriate for deriving the cost of constructing a custom machine, designing a software program, constructing a building, or manufacturing a small batch of products. Job costing involves the following accounting activities:

• Materials. It accumulates the cost of components and then assigns these costs to a product or project once the components are used.

• Labor. Employees charge their time to specific jobs, which are then assigned to the jobs based on the labor cost of the employees.

• Overhead. It accumulates overhead costs in cost pools, and then allocates these costs to jobs.

Characteristics of Job Costing:- Each job is identifiable from the stage of material till its completion and delivery. The following are the features of industries and firms where job costing is usually applied. The costing method has to be adapted to suit the specific features in an industry or a firm.

1. Jobs are undertaken against the orders of customers, as per their instructions.

2. Production, is not meant for stock and future sale. The production is not continuous.

3. The jobs differ from each other requiring different methods, materials or skills and treatment.

4. The jobs go through different operations and departments as per their specific requirements. There is no uniformity in the flow of production.

5. Each job is treated as a cost unit and a production or job order number is issued. The job is identified with such number throughout the different stages of production.

6. Separate cost sheet is prepared for each job to ascertain its cost and profit.

7. Estimating the costs and quotations to the customers on that basis are widely practised.

Skills required for Manager to posses for Job costing are:-

• Planning, Studying, and collecting data to determine costs of business activity such as raw material purchases, inventory and labor.
• Analyzing data collected and recording results
• Analyzing changes in product design, raw materials, manufacturing methods or services provided, to determine effects on cost
• Analyzing actual manufacturing costs and preparing periodic reports comparing standard costs to actual production costs
• Recording cost information for use in controlling expenditures
• Analyzing audits of costs and preparing reports
• Making estimates of new and proposed product costs
• Providing management with reports specifying and comparing factors affecting prices and profitability of products or services.
• Maintaining Cost Accounting System
• Assisting in Month end close of the General Ledger
• Conducts physical inventories and monitors cycle count program
• Reconciles finished goods inventories