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Business Principles on Job Costing

When ordering for goods it is always important to first fill in an order sheet that might be in a specific order book especially when dealing with large companies. The order sheet gives details of the goods being ordered for by anyone. It has an identification number that specifically identifies that particular order and makes it unique from the rest. This order when it is dully filled in is sent to the supplier and a copy is left with the ordering firm. This makes it easy when it comes to claims arising in cases of errors during payments as it can be retrieved and used for cross-referencing.
The process of job costing starts with the filling in of a job sheet. This sheet gives all the details of the work done. It also shows the type of the work done and its’ duration. It is after filling in of this sheet that the type of costs incurred is determined. The process of determining the type of costs incurred is not easy and thus calls for first determining the nature of the costs.
As is already known, the costs can be fixed (those that remain constant irrespective of the level of output e.g. rent), variable (those, which vary with the level of, output e.g. wages) or semi-variable (those that are partially fixed and partially variable like the telephone charges).
After the nature of the costs is determined, then it follows that the type of each costs that has been used in the production process is then made known. The type of costs can be either direct or indirect. Direct costs are the ones that can be linked directly to the final product like the costs of materials used and labor while the indirect costs are those that cannot be directly linked to the final product for example the rent of the premises. The values of the costs of materials can be got from the material requisition forms already filled in. This enhances uniformity of the costing process in order to cater for the comparison that comes in later on.
The exact costs of the materials purchased is then determined. The figures of this value are directly got from the order sheets that were dully filled in, during the initial process of ordering. When this is comprehensively done, the direct costs of labor incurred in the whole of the production process are also determined.
The data pertaining to the labor supply may be obtained from the time sheets that were filled in by the laborers during their working days. The time sheets are documents that are tailored in such a way that the information concerning the name of the worker, the type of job done, the minimum duration spent on the task and the unproductive time is obtainable.
It is worth noting that costing should be done while the work is still in progress. One should not wait until the work is completed so that he can start the costing process unless he or she was undertaking a small-scale job. This is done in order to ensure that the information is still fresh and factors like inflation do not set in.
Costing also calls for a wise way of proportioning the indirect costs to the various commodities so as not to under-price one commodity while over-pricing the other. This can be done manually for the smaller-scale businesses while for the larger scale ones computer software may be used in order to save on time and increase the volume of output.
After the direct and indirect costs are determined and assigned proportionately, the transportation costs are then determined as well. These costs are incurred in the process of moving goods or services from one place to another. The transportation costs of some items can be easily determined and allocated while for others it might be a toll order. For example, the costs incurred in moving labor from one area to another can be easily determined in terms of transport cost and fixed on the final cost of the service to be delivered. For other cases like where hawking is involved, it might call for a more specialized system in order to distribute all costs incurred to the various commodities being sold. The other minor costs like outside services are also catered for in this area.
Finally, after all costs are determined they are totaled. When this is done, a concrete comparison to the figures recorded on the quotation is done. This helps to tell whether the whole work done has taken more or less, than what was initially written down on the quotation. Any variations noted are analysed and reasons as to why they arise are analysed. In cases where there is wastage in terms of materials or time, detailed suggestions on how the losses could be reduced in the future are given. This also calls for the discussion of measures that were put in place to ensure that the time was saved and material wastage was minimized. It thus shows how successful the efforts geared to saving money and maximizing on profits were.
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