Cost Accounting · Job Costing

Job Cost Sheet and Procedure of Job Costing

Updated 10 October 2026 · Fact-checked

A job cost sheet records every cost of one customer order: direct materials, direct labour, direct expenses and absorbed overheads. Job costing follows the flow from enquiry to production order to job cost sheet. To solve a problem, charge direct costs to the job, absorb overheads at the given rate, then total the cost and add profit.

Understand Job Cost Sheet and Procedure of Job Costing

Job costing is used when work is done to a customer's specific order. Each order is different in size, design or specification. Examples are a printing press making wedding cards, a workshop building a machine, or a garage repairing a vehicle. The cost of each order is found separately.

The flow starts with a customer enquiry. The costing department prepares an estimate and a quotation. If the customer accepts, a production order (job order) is issued with a unique job number. The job number is the key. Every cost document for that work carries it, so costs can be traced to the right job.

The job cost sheet is the main record. It is opened when the job starts and shows the cost build-up. Materials are charged from material requisitions (issues from stores). Labour is charged from job cards or time tickets. Direct expenses such as hire of special equipment or a subcontract charge come from invoices. Overheads are charged by an absorption rate fixed in advance, for example a percentage of direct wages or a rate per labour hour.

When the job is complete, the sheet is totalled to get the total cost. Profit is added to get the selling price, or compared to the price to find actual profit. Jobs not yet complete at the period end are work in progress, and the cost sheet gives their value. Materials returned to stores or transferred to another job must be shown on the sheet as a deduction or transfer, so that each job bears only its own cost.

Key rules to remember

Prime cost: Prime cost = Direct materials + Direct labour + Direct expenses; Direct costs traced to the job through the job number.
Direct labour cost: Labour cost = Hours worked × Wage rate per hour; Hours come from the job card or time ticket.
Overhead absorption: percentage of direct wages: Rate % = (Budgeted overheads ÷ Budgeted direct wages) × 100; Overhead charged to job = Rate % × direct wages of the job.
Overhead absorption: labour hour rate: Rate per hour = Budgeted overheads ÷ Budgeted labour hours; Overhead charged = Rate × labour hours of the job.
Factory cost and total cost: Factory cost = Prime cost + Factory overheads; Total cost = Factory cost + Administration and selling overheads; Use the overhead rates given for each stage; do not mix them.
Selling price with profit: Profit on cost = Total cost × Profit % ; Price = Total cost + Profit; If profit is on selling price, Price = Total cost ÷ (1 − profit %).

How to solve Job Cost Sheet and Procedure of Job Costing questions

Use this order for any job cost sheet question. It keeps the layout clean and earns step marks.

1Read the question and note the job number, the period and what is asked: total cost, cost per unit, selling price or profit.
2Write the cost sheet heading: job number, customer, dates, quantity.
3Charge direct materials. Deduct any materials returned to stores and adjust for transfers to or from other jobs.
4Charge direct labour as hours × rate for each department or grade. Add direct expenses.
5Show prime cost as a subtotal.
6Work out the overhead rate from the budget data, then charge factory overheads on the stated base. Show factory cost.
7Add administration and selling overheads on the stated basis to reach total cost.
8Add profit as given (on cost or on selling price) to get the price, or compute profit if the price is given. Divide by units if cost per unit is asked.

Quickest way: Column-wise cost sheet with rate first

When to use it: When the question gives several data items and you have little time, as in a 14-mark numerical.

Compute the overhead rates first and write them at the top of your page.
Draw two columns: particulars and amount in ₹.
Fill materials, labour and expenses in order and write subtotals immediately.
Apply each rate once to its own base. Tick the base used.
Check that the total ties: prime cost + overheads + profit = price.

Common mistakes in Job Cost Sheet and Procedure of Job Costing

Applying the overhead rate on the wrong base, such as direct materials instead of direct wages.
Students see several figures and use the nearest one.
Fix: Underline the base in the question (wages, labour hours, machine hours) and write it beside the rate.
Forgetting to deduct returned materials or to adjust transferred materials.
These are mentioned in a side note and are easily missed.
Fix: Scan the question for words like returned, transferred, scrap and adjust the material line before moving on.
Calculating the overhead rate on actual instead of budgeted figures.
Both sets of numbers appear in the question.
Fix: Use budgeted overheads and budgeted base to fix the rate, unless the question says to use actuals.
Computing profit on cost when it is given on selling price, or the reverse.
The two phrases look alike.
Fix: If profit is x% on selling price, divide cost by (100 − x)% . If on cost, multiply cost by (100 + x)%.
Mixing the layout, with no subtotals for prime cost and factory cost.
Students rush to the final figure.
Fix: Always show prime cost, factory cost, total cost as labelled subtotals. Marks are given for each.
Treating the job cost sheet as only a numbers statement and ignoring the documents and procedure in theory questions.
Students prepare only numericals.
Fix: Learn the flow: enquiry, estimate, production order, requisition, job card, cost sheet, completion, and the purpose of each document.

Worked examples

Example 1

Job No. 105 for a customer needs these: direct materials issued ₹48,000; materials returned to stores ₹2,000; direct wages 300 hours at ₹60 per hour; direct expenses ₹4,000. Factory overheads are absorbed at 80% of direct wages. Administration overheads are 10% of factory cost. Prepare the job cost sheet and find the price if profit is 20% on cost.

Show the solution

Net materials = 48,000 − 2,000 = ₹46,000.
Direct wages = 300 × 60 = ₹18,000.
Prime cost = 46,000 + 18,000 + 4,000 = ₹68,000.
Factory overheads = 80% × 18,000 = ₹14,400.
Factory cost = 68,000 + 14,400 = ₹82,400.
Administration overheads = 10% × 82,400 = ₹8,240.
Total cost = 82,400 + 8,240 = ₹90,640.
Profit = 20% × 90,640 = ₹18,128.
Price = 90,640 + 18,128 = ₹1,08,768.

Answer: Total cost of Job 105 is ₹90,640 and the price is ₹1,08,768.

Example 2

A workshop budgets for the year: factory overheads ₹6,00,000 and direct labour hours 40,000. Job 21 uses direct materials ₹30,000, direct labour 400 hours at ₹50 per hour and direct expenses ₹3,000. 100 units are produced. Selling and distribution overheads are 5% of factory cost. Find the total cost and cost per unit of Job 21.

Show the solution

Overhead rate = 6,00,000 ÷ 40,000 = ₹15 per labour hour.
Direct wages = 400 × 50 = ₹20,000.
Prime cost = 30,000 + 20,000 + 3,000 = ₹53,000.
Factory overheads = 400 × 15 = ₹6,000.
Factory cost = 53,000 + 6,000 = ₹59,000.
Selling and distribution overheads = 5% × 59,000 = ₹2,950.
Total cost = 59,000 + 2,950 = ₹61,950.
Cost per unit = 61,950 ÷ 100 = ₹619.50.

Answer: Total cost is ₹61,950 and cost per unit is ₹619.50.

Exam tips

Write the job cost sheet in a vertical layout with subtotals for prime cost, factory cost and total cost. Step marks follow the layout.
Show the overhead rate calculation separately so you get marks even if a later figure is wrong.
For MCQs, check the base of absorption and whether profit is on cost or on selling price before choosing an option; wrong options are built from these slips.
In theory questions, list documents in sequence and give the use of each in one line: production order, material requisition, job card, cost sheet.
If a job is incomplete at period end, state that its cost to date is work in progress.

Practice questions from Job Costing

Job Cost Sheet and Procedure of 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 Cost Sheet and Procedure of Job Costing: frequently asked questions

What is a job cost sheet?

It is a record opened for each job that collects its direct materials, direct labour, direct expenses and absorbed overheads. It gives the total cost of the job and is the base for pricing. It is also used to value incomplete jobs as work in progress.

Which documents are used in job costing?

The main documents are the enquiry and estimate, production order, material requisition, material return note, job card or time ticket, and the job cost sheet. Each carries the job number so costs reach the right job.

How are overheads charged to a job?

Overheads are charged using a predetermined rate, such as a percentage of direct wages or a rate per labour hour. You multiply the rate by the job's actual base, for example its wages or hours. Use the base given in the question.

Is profit on cost the same as profit on selling price?

No. Profit of 20% on cost is one-fifth of cost, so it is one-sixth of the selling price. Read the wording carefully, as the price differs in the two cases.