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Job Costing – Examples, Practical Problems and

Solutions
June 20, 2019 by rashidjaved

Table of Contents 
1. Example (Problem) No. 1
1.1. Solution
2. Problem No.2
2.1. Solution
3. Problem No. 3
4. Solution
5. Problem No. 4
5.1. Solution
5.2. Related posts:

Example (Problem) No. 1

A job No. 58 passes through three departments namely X, Y and Z. The following information is given to you
regarding this job:
Required:

You are required to calculate the cost of job No. 58 from the above figures.

Solution
Note: Calculation of overhead chargeable to Job No. 58 has been made as follows:
Problem No.2
The following expenses were incurred for a job during the year ended on 31st March 2019:

Single price for the above job was $1,80,000. You are required to prepare a statement showing the profit earned
during the year ended 31.3.2019 from the job and an estimated price of a job which is to be executed in the year
2019-20, charging the same percentage of profit on sales as it was during the year 2019-20. Materials, wages and
chargeable expenses will be required of $50,000, $70,000 and $20,000 respectively for the job. The various
overheads should be recovered on the following basis while calculating the estimated price:

(a). Factory overheads as a percentage of direct wages.

(b). Administrative and selling and distribution overheads as a percentage of factory cost.

Solution

Note: Calculation of various overheads rates and percentage of profit on sales:

Problem No. 3
M/s. Perfect Printers Ltd. operates a printing press. During November 2019, the plant was operating at full capacity.
The material and labor costs of Job 101 and all other jobs worked on, in November, are shown below:

In addition to the foregoing costs, factory overhead incurred in November amounted to $44,000. Overhead is
allocated to production on the basis of direct labor costs.

Required:

You are required to:

(i). Show what factory Profit or Loss on Job 101 would be, using two different methods of accounting for overtime
premium. Assume that the contract price for this job is $40,000.

(ii). Indicate under what circumstances each method should be used.

(iii). State whether the profit or loss of the company during November would be affected by the choice of one
method or another.

Solution
Factory Overhead Recovery Rate = (Factory Overhead / Direct Labor Cost) x 100
= (44,000 / 44,000) x 100 = 100%

(i). (a): If the overtime premium is fully charged to Job No. 101:

(i). (b): If overtime premium is charged pro-rata to all jobs:

(ii). Overtime premium should be charged fully to Job No.101 if it was a rush job and it was done at the request of
the customer. But if the overtime work was due to limited production capacity and it was accidental that Job 101
was done during the overtime then premium should be charged pro-rata to all jobs.

(iii). Profit and Loss of the company during November will be affected by the choice of any of the method if all the
jobs performed during the month are not completed by the end of the month. If overtime premium is fully charged to
Job 101 but is not completed by November 30 then the loss on this job will not be taken in the account of November
2019. Similarly, If overtime premium is charged pro-rata to all the jobs and profit or loss on any job remaining
incomplete will be carried over to the next month.

Problem No. 4
The following particulars are drawn from the costing books of a contractor for the month of December, 2019.
The respective Job Accounts showed the following balance in Contract Ledger on 30th November 2019.

Job No. 201 = $3,21,580

Job No. 202 = $1,41,865

A certificate of completion was obtained for Job No. 201; of the balance of this account standing on 30th Nov. 2019,
$61,500 was in respect of plant and machinery, the remainder consisting of wages and materials. A machine
costing $5,500 specially brought for this contract, was sold during December, 2019 for $2,000. Of the remainder of
the balance on plant and machinery $40,000 worth had been utilized on the Job for eight months and the rest for six
months. Of the former, half was transferred to Job No. 202 and the whole of the remaining plant was returned to
stores. The contract price for Job No. 201 was fixed at $3,75,000.

Prepare Contract Accounts for the two Jobs and state the profit made on Job certified as completed, allowing
depreciation on machinery at 15 percent per anum. Assume 10 percent for establishment charges on the cost of
wages and materials consumed.

Solution
Working Notes:

1. Establishment charges in respect of Job No. 201 A/c have been calculated as follows:
2. Depreciation on plant and value of plant returned to stores have been calculated as follows:
Plant Costing $40,000 has been used for 8 months and plant costing $16,000 for 6 months.
Half of the plant having the total depreciated value of $36,000 has been transferred to Job No. 202.
Related Posts:
1. Contract Accounting Practical Problems and Solutions
2. Contract Costing
3. Flexible Budget Practical Problems and solutions
4. Production Budget Practical problems and solutions
5. Q. 8. Standard Costing practical problems and solutions

 Cost Accountancy

 Contract Accounting Practical Problems and Solutions

 Difference Between Process Costing and Job Costing

2 thoughts on “Job Costing – Examples, Practical Problems and Solutions”

 Ikenna maduekwe Michael
July 12, 2019 at 5:16 pm

Very simplified. Good job.

Reply

rashidjaved
July 12, 2019 at 6:12 pm

Thank you for your appreciation. Kindly, Share it with your friends.
best,
Admin

Reply

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