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CA Intermediate · Cost and Management Accounting · Job Costing

A job shop finds that a job's actual material cost was higher than estimated because of a customer's change request after production started. Under job costing, how should the extra cost be treated for that job?

The extra material cost should be charged to that particular job, because it was caused by the customer's change and can be directly identified with the job. Treating it as general overhead would wrongly burden other jobs.

  1. ACharged to that job as it is specifically identifiableCorrect
  2. BSpread over all jobs as factory overhead
  3. CWritten off to the costing profit and loss account only
  4. DIgnored until the next quotation

Explanation

Material used on a specific job at the customer's request is a direct cost and is charged to that job. Spreading it as overhead would distort other jobs' costs.

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