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CMA Intermediate · Cost Accounting

Job Costing for CMA Intermediate Cost Accounting

Job costing is a method of costing where cost is collected and tracked separately for each job, which is a customer order made to specification. You open a job cost sheet, add materials, labour, direct expenses and overheads, then add profit to get the price. Batch costing treats a batch as one job.

What this chapter covers

Job costing applies when each order is different and has its own specification, such as printing, furniture, tool-making or repair work. You collect cost against a job number, so you know what each order cost and whether it made a profit.

The chapter moves in a clear line. First you learn when job costing applies. Then you build the job cost sheet from material requisitions, wage records and overhead absorption. Next you use that cost to price a job or prepare a quotation. Batch costing extends the same idea to a lot of identical units, and includes the Economic Batch Quantity (EBQ). The last topic handles work in progress, spoilage, defectives and scrap inside a job.

This chapter sits on top of your earlier cost work: the cost sheet layout, material and labour costing, and overhead absorption. If those are weak, job costing questions will feel harder than they are. It also leads into other costing methods in the paper, such as contract and process costing, where the same logic of tracing cost to a cost unit applies.

Job costing questions are mostly numerical and reward a neat, step-by-step layout. A job cost sheet is a format you can practise until it is automatic, so it is a good chapter for securing step marks. Pricing, batch costing and EBQ also give you short calculations that can appear as MCQs in the compulsory Section A (2 marks each, no negative marking) as well as in the written questions. Because the chapter reuses material, labour and overhead concepts, time spent here also strengthens the rest of the paper.

Job Costing: topics in the order to study them

  1. 1Job Costing: Meaning, Features and ApplicabilityStart here to learn what a job is and when this method is used, since every later topic assumes it.
  2. 2Job Cost Sheet and Procedure of Job CostingThis is the core format of the chapter, so master it before you attempt pricing or batches.
  3. 3Pricing a Job: Estimates, Profit and QuotationsPricing needs a correct cost sheet first, and it adds profit as a percentage of cost or of selling price.
  4. 4Batch Costing and Economic Batch QuantityA batch is treated like a job, so it comes after you are comfortable with job cost sheets.
  5. 5Work in Progress, Spoilage, Defectives and Scrap in JobsStudy this last because it adjusts job cost and needs the full cost sheet and batch ideas already clear.

How to prepare Job Costing

Treat this chapter as a format to practise, not a theory to memorise. Aim for a layout you can reproduce under time pressure.

  1. Read the meaning and features once, and list two or three examples of industries that use job costing and why.
  2. Write a blank job cost sheet from memory: direct materials, direct labour, direct expenses, prime cost, factory overhead, works cost, then office overhead and total cost.
  3. Solve numericals where overhead is absorbed on a rate, such as per labour hour or as a percentage of wages, and show the rate calculation as a separate step.
  4. Practise pricing: work out total cost, then add profit. Check whether profit is on cost or on selling price before you calculate.
  5. Learn the EBQ idea (balancing set-up cost against carrying cost) and solve several batch problems, including cost per unit of a batch.
  6. For spoilage, defectives and scrap, decide first whether the loss is normal or abnormal and whether it belongs to the job or to overheads, then apply the treatment.
  7. Finish with one timed full question and one set of 15 MCQs, then review every step where you lost marks.

Common mistakes in Job Costing

  • Using the wrong base for overhead absorption

    Fix: Underline the base in the question, such as labour hours or direct wages, and show the rate calculation separately.

  • Confusing profit on cost with profit on selling price

    Fix: Read the wording each time. For profit on sales, divide cost by (1 − rate), or add rate ÷ (1 − rate) to cost.

  • Treating all spoilage the same way

    Fix: Ask first whether the loss is normal or abnormal, and whether it is specific to the job. Then apply the matching treatment.

  • Mixing up job costing and batch costing in units

    Fix: Always finish batch questions with cost per unit and, where asked, the price per unit.

  • Writing a cost sheet without clear totals

    Fix: Use fixed subtotals for prime cost, works cost, cost of production and total cost so the examiner can award step marks.

  • Ignoring the EBQ conditions

    Fix: Identify set-up cost per batch and carrying cost per unit first, then check the given data before substituting.

Last-day revision: Job Costing

  • Job costing: cost is collected separately for each customer order, with its own job number.
  • The job cost sheet is the main record, with materials, labour, direct expenses and overheads.
  • Materials come from requisitions, labour from job tickets or time records.
  • Overheads are charged to jobs using a predetermined absorption rate.
  • Prime cost = direct materials + direct labour + direct expenses.
  • Price = total cost + profit; check if profit is on cost or on selling price.
  • Profit on selling price: selling price = cost ÷ (1 − profit rate).
  • A batch is a group of identical units costed together; cost per unit = batch cost ÷ units.
  • EBQ balances set-up cost against carrying cost; use the formula given in your study material.
  • Normal spoilage is part of the job cost; abnormal loss is charged to the costing profit and loss account.
  • The sale value of normal scrap is credited to the job if the scrap is identifiable with that job; otherwise it is credited to factory overheads (or the costing profit and loss account), as your study material specifies.
  • Show working notes for rates and adjustments, because they earn step marks.

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 job costing in simple words?

It is a method where you track cost separately for each customer order. You add materials, labour and overheads to a job cost sheet. Then you add profit to fix the price.

How is job costing different from batch costing?

In job costing each order is usually unique. In batch costing a group of identical units is made together and costed as one job. You then divide the batch cost by the number of units.

Do I need to memorise the EBQ formula?

Yes, you should know it and be clear about what each term means. More important is identifying set-up cost and carrying cost from the question and applying them correctly.

Can job costing appear in the MCQ section?

Yes. Section A has 15 standalone MCQs of 2 marks each across the paper, so short items such as overhead rate, profit on selling price or cost per unit of a batch can come up. There is no negative marking.

How should I write a job costing answer?

Use a proper job cost sheet with clear subtotals and show overhead rate workings below it. State the price or profit at the end with the basis used. This layout helps you earn step marks even if one figure is wrong.