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CA Intermediate · Cost and Management Accounting · Job Costing

Anand Interiors completed a job with a cost of Rs 1,20,000. During production, abnormal spoilage specific to a customer's special instructions caused by a design change requested by the customer led to extra cost of Rs 9,000 included in that figure. How is this ordinarily treated in job costing?

The Rs 9,000 should be charged to the specific job, because the extra cost arose from that customer's special requirement. Costs of spoilage or rework specific to a job are borne by that job, whereas normal general spoilage goes to overheads.

  1. ACharged to the specific job since it arose due to the customer's requirementCorrect
  2. BCharged to costing profit and loss account as abnormal loss
  3. CSpread over all jobs of the factory through overhead rate
  4. DIgnored and written off to the next job

Explanation

If rework or spoilage arises because of the special requirements of a particular job, its cost is charged to that job. Only spoilage common to all jobs and normal is absorbed through overheads. Abnormal loss due to avoidable factory inefficiency goes to costing profit and loss, which is not the situation here.

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