Chapter 14: Job, Batch, and Service Costing

Job costing is used where a customer orders a specific job; the job is costed separately, with all associated costs listed to arrive at a total cost. Batch costing is the same, applied to a batch of units, with the batch cost then divided by the number of units. Service costing usually needs a composite cost unit, a combination of two variables.

(a) Job XXX. Direct materials 4 kg at $25 per kg; labour 10 hours at $5 per hour. Variable overheads are recovered at $2 per direct labour hour. Fixed production overheads are absorbed at $4 per direct labour hour. Other, non-production, overheads are charged at $100 per job.

(b) Job YYY is the production of a batch of 1,000 units. Direct materials 50 kg at $25 per kg; labour 100 hours at $5 per hour. Variable overheads are recovered at $6 per direct labour hour, fixed production overheads at $10 per direct labour hour, and other non-production overheads at $200 per job.

(c) Last year an airline carried a total of 150,000 kg of excess baggage over a total distance of 6,000 km. The total cost of the extra fuel was $27,000,000.