Question

You are required to come up with a business that is fit to apply JOB Costing on. That is each product/service/project is unique than the other in its using resources, labor, and other indirect manufacturing costs.

1. You have to give a name for your business.

2. You have to explain the products or services or projects that you provide for your customers.

3. Write the Mission Statement and Vision of your firm .

4. Come up with at least three strategic and operational objectives.

5. Come up with your Cost Pools and identify appropriate allocation base(s).

6. Give 1 example of one of your products/services/project and apply Job Costing to it. That is, you have to identify how much Direct Material, Direct Labor; and Manufacturing Overhead cost is incurred.

7. Come up with your example’s (6) price to be sold to your customers.

8. Prepare 3-year Forecasted/Budgeted Income Statements, explaining the logic behind your numbers with respect to revenues and expenses as well as interest and tax.

Answer 1

The unit is producing pens and mainly ball point pens. I chose this as it would be one of the best business as a manufacturing unit for applying the job costing.

1. Name of the business.

The name of the business is ‘Writer’ as it is manufacturing pens.

2. Products that is provided by the company to its customers.

The company is mainly catering the customers with ball point pens with 0.5mm thickness for writing in red, black, blue, green and many other varied colors. We also manufacture and supply customized pens for companies, schools and other entities or organizations on the basis of their order. We also produce pens with the colors suiting the themes of the company which ordered the same for.

3. Mission and Vision statement for the firm.

- The mission statement: ‘We make writing simple and beautiful.’

- The vision statement: ‘To become the quick writing partner by providing products with highest durability and sustainability.’

4. 3 strategic and operational objectives:

- Strategic Objectives:

a. Growing the shareholder and their earning per share which would eventually increase the value of the company amidst the investors.

b. Increasing revenue and managing the cost so as to increase and maximize the profit as the costs are reduced and kept at the bay.

c. Increasing the customer retention ratio by increasing the value served and this would also help us win more such customers and orders from them again.

- Operational Objectives:

a. Improved production by managing the production unit in the best possible manner and this would increase increasing the production while minimizing the costs while the quality is raised.

b. Better debt management is another operational objective where by the company maximize their profits by proper collection of pending funds, billing, debt-service management and also making good and dependable lines of credit.

c. Increased use of information technology and integrating the various departments and having a real time update the various aspects like production, inventory, debt collection, billing, HR management and the like. And this can also be the use of social marketing and other platforms for increasing the revenue and customer base.

5. Cost pools and allocation bases:

Some of the cost pools and the allocation bases of the same are pointed below:

a. Direct Labor – Number of products produced

b. Direct Material - Number of products produced

c. Manufacturing OH - Number of products produced

6. The product to which I would apply the job costing would be the pens which are produced and sold by my company.

Direct Material: $0.25

Direct Labor: $3.50

Manufacturing OH: $2

Total: $5.75

7. Price at which the product can be sold to the final consumers:

The product would be sold to the final consumers at the rate of $8 per pen.

8. 3 year forecast income statements:

INCOME STATEMENT
PARTICULARS	YEAR 1	YEAR 2
1. Revue or Sales	64000	76360.00
2. Expenses
a. Direct Labor	28000	34960
b. Direct Material	2000	2760
c. Manufacturing OH	16000	21160
3. Profit as per the Forecast	18000	17480

INCOME STATEMENT
PARTICULARS	YEAR 3
1. Revue or Sales	97152.00
2. Expenses
a. Direct Labor	44160
b. Direct Material	4195.2
c. Manufacturing OH	28704
3. Profit as per the Forecast	20092.8