Question

Project 1 Prepare job costing information for the following: Joseph runs an electrical contracting business and employs six electricians. He is only involved in supervision but on occasion will assist if needed. He charges direct labour hours at $45.00 per hour. Three of Joseph’s electricians are working on a job that involves wiring and fitting fixtures in a new house for Mr and Mrs Fleet. All materials and fixtures used have come from inventory. Each electrician spends half an hour at the beginning of each day on administration tasks and travels for half an hour to get to the job. They also spend half an hour at the end of the day undertaking administrative tasks. If they finish a job late afternoon and there is not enough time to start another they return to base and fill the time with other administrative tasks. Geoff Smith is responsible for the initial wiring. He calculates that he will need two rolls of electrical cabling and that it will take him 12 hours to complete the job. He works on the job on 15/10/11 and 18/10/11. He completes a materials requisition form and the cost per roll of electrical cable is $85.00. Peter Jones is responsible for fitting all fixtures. He has to fit 23 double power points and 15 down lights. Takes seven hours, so he works for longer to get it done in one day (there are no overtime penalties to worry about). He works on the site on 18/10/11. His materials requisition form shows that the power points are $7.50 per unit and the down lights are $25 each. Brian Brown is the senior electrician and he wired the switchboard, the circuit breakers and checked the work undertaken by the others. He expected this to take about four hours but he was there for seven hours because of problems encountered. He began his work on 22/10/11 and completed the remaining four hours on 25/10/11. The switchboard cost was $190.00 and the circuit breakers were $19.00 each. Twelve were needed. Brian took the afternoon of the 22nd and the morning of the 25th off for recreation leave. He went straight from the job to take his leave and went to the job from his leave without going to the workshop. Recreation leave is costed as administration. Each electrician normally starts at 8.30 am and has lunch from 12.30 until 1.00 pm. At the beginning of the financial year Joseph examined all of his overhead costs; vehicle leases, rent on premises, inventory, replacement of specialised equipment, depreciation, indirect labour, indirect materials, salary on-costs and insurance. These include his fixed and his variable costs. He calculated overall costs to be $662,500. 1 If each of his six electricians worked 46 weeks at 40 hours per week, what are his overhead costs? Complete the jobsheets, the Job cost form for each electrician and the job cost form report.

Answer 1

Job order costing track and assign two types of costs in the cost sheet. Direct costs in the form of labor, materials etc. allocable directly to that particular job and the indirect ones that are not directly traceable to that job but incurs on an event are allocated based on an absorption rate.

First of all, we shall segregate the direct costs.

If they work for 40 hours a week it comes to 8 hours a day which usually starts from 8:30 a.m. and can continue till 6:30 p.m. in the evening. Of these time, first one hour is spent on administrative tasks and commute to the workplace. Work finishes at 6 ‘O clock in the evening and 6:00 to 6:30 p.m. is spent again on administrative setup. Workable hours lies between 9:30 a.m. to 6:00 p.m. with half an hour lunch-break in between (12:30 p.m. to 1:00 p.m.)

Geoff Smith:

Materials: 2 rolls x $85.00 = $170

Labor: 12 hours booked

Peter Jones:

Materials: Power points→ 23 nos. x $7.50 = $172.50

                 Down lights→ 15 nos. x $25.00 = $375.00

Labor: 7 hours booked

Brian Brown:

Materials: Switchboard→ 1 pc x $190.00 = $190.00

                 Circuit breakers→ 12 pcs x $19.00 = $228.00

Labor: 7 hours booked

Total overhead: $662500

Total labor hours: 46 weeks x 40 hours = 1840 hours.

Overhead cost per hour = $662500 / 1840 = $360.00 (approx..)