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4. Job Costing. Hanif Kanjer Dean, Rustomjee Business School. Index. Overheads are to be allocated Cost-allocation base Actual Costing Normal Costing (computed using Budgeted overhead rate) Under-allocation, Over-allocation.

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4 job costing

4. Job Costing

Hanif Kanjer

Dean, Rustomjee Business School

index
Index
  • Overheads are to be allocated
  • Cost-allocation base
  • Actual Costing
  • Normal Costing (computed using Budgeted overhead rate)
  • Under-allocation, Over-allocation
actual costing normal costing accounting for manufacturing overhead
Actual Costing, Normal Costing, accounting for manufacturing overhead

E.g. 4-17, Pg 151

Cost Allocation base :

Direct Manufacturing Labor Costs

Manufacturing Overhead costs =

Mfg OH rate* direct mfg labor costs

job costing normal costing actual costing1
Job Costing, Normal Costing, actual Costing

E.g. 4-18, Pg 151

Manufacturing costs of a job are available much earlier under a normal-costing system.

So, managers can evaluate the profitability of different jobs, the efficiency with which the jobs are done, and the pricing of the jobs are soon as the jobs are completed, while the experience is still fresh in everyone’s mind.

Another advantage of normal costing is that corrective actions can be implemented much sooner.

At the end of the year, though, the costs allocated using normal costing will not, in general, equal the actual costs incurred.

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