CA Intermediate · Cost and Management Accounting

Job Costing for CA Intermediate: Chapter Guide

Job costing is a costing method for work done to a customer's order, where each job is costed separately. You collect material, labour and overheads on a job cost sheet, add profit to get the price, and for batches, find the economic batch quantity. Solve it by building the cost sheet in order.

What this chapter covers

Job costing is a method of costing used when work is done against a specific customer order, and each job differs in size, specification or time taken. Printers, repair shops, furniture makers, foundries and construction contractors use it. The core tool is the job cost sheet, which gathers direct material, direct labour, direct expenses and overheads for one job.

The chapter has four parts. First, the meaning, features and where job costing applies. Second, the cost sheet and the paperwork behind it, such as material requisitions and job tickets. Third, the numericals: build the cost, absorb overheads, add profit, and work out the price or the profit on a job. Fourth, batch costing, where a batch of identical units is treated as one job, and the economic batch quantity (EBQ).

This chapter connects to the rest of Paper 4. It uses the cost classification, material, employee cost and overhead chapters you studied before it. Overhead absorption in particular carries straight into job costing. It also leads into contract costing, process costing and other methods of costing. If you can build a clean cost sheet here, those later chapters become easier.

Job costing is a practical, number-based chapter, and it is easy to score in if your layout is right. The same cost sheet format is used in many questions across the paper, including those on overheads, pricing and other methods of costing. Examiners can set both MCQs (meaning, features, EBQ formula, simple price calculations) and written questions (a full cost sheet with a quoted price) from it. In a written answer, each correct line in your cost sheet earns step marks even if the final figure is wrong, so a neat format protects your marks. The effort is modest compared with the return, and the skills carry into other chapters.

Job Costing: topics in the order to study them

1Job Costing: Meaning, Features and ApplicabilityStart here to learn what a job is, how it differs from other methods, and where it applies. The MCQs on features and suitability come from this topic.
2Job Cost Sheet and Procedure of Job CostingNext, learn the cost sheet layout and the documents that feed it. You need this format before you can attempt any numerical.
3Job Costing Numericals: Pricing, Profit and OverheadsNow apply the format: absorb overheads on a stated basis, add profit as a percentage of cost or of price, and find the quote or profit.
4Batch Costing and Economic Batch QuantityStudy this last because it builds on job costing: a batch is costed like a job, and EBQ balances set-up cost against carrying cost.

How to prepare Job Costing

Prepare this chapter in a sequence that moves from definitions to format to numbers, and then to batches. Keep the practice hands-on, since cost sheets are learned by writing them.

Read the meaning, features and applicability once, and list the features in your own words. Note which businesses suit job costing and why.
Learn the cost sheet layout by heart: direct material, direct labour, direct expenses, prime cost, factory overheads, works cost, then office and selling overheads, total cost, profit and price.
Understand the documents in the procedure, such as the job order, material requisition, and job ticket, and what each feeds into the sheet.
Solve numericals in steps. First find the direct costs, then absorb overheads on the basis given (for example a rate per labour hour or a percentage of prime cost), then add profit.
Read the profit instruction carefully. Check whether profit is on cost or on selling price, and convert before you calculate the price.
Learn the EBQ formula and what the set-up cost and carrying cost mean. Practise a few questions where you compare the cost of different batch sizes.
Finish with a timed set of MCQs and two full written questions. Check that every line of your layout is labelled and the workings are shown.

Common mistakes in Job Costing

Mixing up profit on cost and profit on selling price.
Fix: Underline the base in the question. If profit is on price, divide cost by (100 − profit %) and multiply by 100.
Absorbing overheads on the wrong basis.
Fix: Calculate the rate from the data given and apply it to the job's own hours or cost.
Leaving out items in the cost sheet, such as direct expenses or abnormal items.
Fix: Write all headings first, then fill them. Treat only normal costs as part of the job cost, as the question directs.
Treating returned or unused material and scrap wrongly.
Fix: Work out net material cost by deducting returns to store and any scrap treated as job credit, per the question.
Applying the EBQ formula with inconsistent units or wrong cost inputs.
Fix: Put demand, set-up cost and carrying cost on the same period and per-unit basis before substituting.
Giving a bare answer in written questions.
Fix: Show each overhead rate calculation and each cost line, so you earn step marks even if one figure is wrong.

Last-day revision: Job Costing

Job costing applies when each job is separate, made to a customer's order and differs from others.
Each job is costed on its own job cost sheet.
Prime cost = direct material + direct labour + direct expenses.
Works cost = prime cost + factory overheads.
Cost of production adds administration overheads related to production, as the question directs.
Total cost = cost of production + selling and distribution overheads.
Selling price = total cost + profit.
Profit on cost of x% means price = cost × (100 + x) ÷ 100.
Profit on selling price of x% means price = cost × 100 ÷ (100 − x).
Absorb overheads on the basis the question gives, such as a rate per labour hour.
Batch costing treats a batch of identical units as one job; cost per unit = batch cost ÷ units in batch.
EBQ balances set-up cost and carrying cost; it is the batch size where the total of these is lowest.

Job Costing practice questions

Job Costing in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Job Costing: frequently asked questions

What is the cost sheet format in job costing?

Start with direct material, direct labour and direct expenses to get prime cost. Add factory overheads for works cost, then other overheads to reach total cost. Add profit to get the price.

How do I decide between profit on cost and profit on selling price?

Read the wording. 'Profit of 20% on cost' means price = cost × 1.20. 'Profit of 20% on selling price' means price = cost ÷ 0.80. Always check this before you compute the quote.

Is job costing the same as batch costing?

No, but they are closely related. In job costing each job is unique. In batch costing, a group of identical units is treated as one job and the cost per unit is the batch cost divided by the units.

What should I focus on for MCQs in this chapter?

Focus on the features and applicability of job costing, the cost sheet items, the profit on cost versus price conversion, and the EBQ idea. Since there is no negative marking, attempt every MCQ.