Job Costing

Q.1. A factory uses job costing system. The following data are obtained from its books for the year ended 31
March, 2021:
`
Direct materials 1800000
Direct wages 1500000
Selling and distribution overheads 1050000
Administration overheads 840000
Factory overheads 900000
Profit 1218000
(i) PREPARE a Job Cost sheet indicating the Prime cost, Cost of Production, Cost of sales and the
Sales value.
(ii) In 2020-21, the factory received an order for a job. It is estimated that direct materials required will
be ` 480000 and direct labour will cost ` 300000. DETERMINE what should be the price for the
job if factory intends to earn the same rate of profit on sales assuming that the selling and
distribution overheads have gone up by 15%. The factory overheads is recovered as percentage of
wages paid, whereas, other overheads as a percentage of cost of production, based on cost rates
prevailing in the previous year.

Q.2. The manufacturing cost of a work order is ` 100000; 8% of the production against that order spoiled
and the rejection is estimated to have a realisable value of ` 2000 only. The normal rate of spoilage is
2%. RECORD this in the costing journal.
Q.3. The following data presented by the supervisor of a factory for a Job.
` per unit
Direct Material 120
Direct Wages @ 4 per hour
(Departments A-4 hrs, B-7 hrs, C-2 hrs & D-2 hrs) 60
Chargeable Expenses 20
Total 200
Analysis of the Profit and Loss Account for the year ended 31 March, 2021
` ` `
Material 200000 Sales 430000
Direct Wages:
Department. A 12000
Department. B 8000
Department. C 10000
Department. D 20000 50000
Special Store items 6000
Overheads:
Department. A 12000
Department. B 6000
Department. C 9000
Department. D 17000 44000
Gross profit c/d 130000
430000 430000
Selling Expenses 90000 Gross Profit b/d 130000
Net Profit 40000
130000 130000
It is also to be noted that average hourly rates for all the four departments are similar.

Required:
(i) Prepare a Job Cost Sheet.
(ii) Calculate the entire revised cost using the above figures as the base.
(iii) Add 20% profit on selling price to determine the selling price.
Q.4. In the current quarter, a company has undertaken two jobs. The data relating to these jobs are as under:
Job 1102 Job 1108
Selling price ` 107325 ` 157920
Profit as percentage on cost 8% 12%
Direct Materials ` 37500 ` 54000
Direct Wages ` 30000 ` 42000
It is the policy of the company to charge Factory overheads as percentage on direct wages and Selling
and Administration overheads as percentage on Factory cost.
The company has received a new order for manufacturing of a similar job. The estimate of direct
materials and direct wages relating to the new order are 64,000 and 50,000 respectively. A profit of 20%
on sales is required.
You are required to compute:
(i) The rates of Factory overheads and Selling and Administration to be charged
(ii) The Selling price of the new order.
Q.5. AP Ltd. received a job order for supply and fitting of plumbing materials. Following are the details
related with the job work:
Direct Materials
AP Ltd. uses a weighted average method for the pricing of materials issues. Opening stock of materials
as on 12th August 2020:
 15mm GI Pipe, 12 units of (15 feet size) @ ` 600 each
 20mm GI Pipe, 10 units of (15 feet size) @ ` 660 each
 Other fitting materials, 60 units @ ` 26 each
 Stainless Steel Faucet, 6 units @ ` 204 each
 Valve, 8 units @ ` 404 each
On 16th August 2020:
 20mm GI Pipe, 30 units of (15 feet size) @ ` 610 each
 10 units of Valve @ `402 each
On 18th August 2020:
 Other fitting materials, 150 units @ ` 28 each
 Stainless Steel Faucet, 15 units @ 209 each
On 27th August 2020:
 15mm GI Pipe, 35 units of (15 feet size) @ ` 628 each
 20mm GI Pipe, 20 units of (15 feet size) @ ` 660 each
 Value, 14 units @ ` 424 each
Issues for the hostel job:
On 12th August 2020:
 20mm GI Pipe, 2 units of (15 feet size)
 Other fitting materials 18 units
On 17th August 2020:
 15mm GI Pipe, 8 units of (15 feet size)
 Other fitting materials, 30 units
On 28th August 2020:
 20mm GI Pipe, 2 units of (15 feet size)
 15mm GI Pipe, 10 units of (15 feet size)
 Other fitting materials, 34 units
 Valve, 6 units
On 30th August 2020:
 Other fitting materials, 60 units
 Stainless Steel Faucet, 15 units
Direct Labour:
Plumber: 180 hours @100 per hour (includes 12 hours overtime)
Helper: 192 hours @ 70 per hour (includes 24 hours overtime) Overtimes are paid at 1.5 times of the
normal wage rate.
Overheads:
Overheads are applied @ 26 per labour hour.
Pricing policy:
It is company's policy to price all orders based on achieving a profit margin of 25% on sales price.
You are required to:
(a) CALCULATE the total cost of the job
(b) CALCULATE the price to be charged from the customer.

Contract Costing
Q.6. The following is summarized record relating to contract No. 103.
`
Materials issued from stores 60000
Materials from contract No. 106 6000
Materials purchased 54000
Wages 48000
Outstanding wages 12000
Plant purchased for this contract 50000
Indirect charges 10000
Outstanding indirect charges 2000
Materials worth ` 2000 and plant costing ` 2500 were returned to stores. Materials costing ` 4000 and
plant costing ` 1500 were stolen. Materials worth ` 500 and plant costing ` 500 were destroyed by fire.
Materials and plant transferred to contract No. 96 were ` 5250 and ` 4000 respectively. Materials
costing ` 4200 were sold for ` 6000 and plant costing ` 1000 were sold for ` 1250. Materials at site
were ` 2600. Providing depreciation on plant @ 10%, Open contract account and find out the cost of
work done on the contract. The contract is not completed.

Q.7. A contract is estimated to be 80% complete in its first year of construction as certified. The contractee
pays 75% of value of work certified, as and when certified and makes the final payment on the
completion of contract. Following information is available for the first year:
`
Cost of work-in-progress uncertified 8000
Profit transferred to Profit & Loss A/c at the end of year I on incomplete contract 60000
Cost of work to date 88000
Calculate the value of work- in-progress certified and amount of contract price.

Q.8. The contract Ledger of a company showed the following expenditure in connection with a contract for
the erection of factory:
`
Special Plant 100000
Materials 150000
Wages 300000
Overhead Charges 6000
The contract price was ` 1200000. It was estimated that it would take one more year for the completion
of the contract. The work certified was ` 800000 and 80% of the certified work was received in cash. At
the end of the year, materials lying on site were valued at ` 20000. Depreciate the plant by 10%. 6% of
wages and 5% of materials may be taken to have been incurred for the portion of work completed but
not yet certified. Overheads are charged as a percentage of Direct Wages. After making the necessary
adjustments, show how the contract account will appear and what profit should be credited to profit and
loss account. Omit depreciation of plant for use on uncertified portion.
Q.9. M/s. Bansals Construction Company Ltd. took a contract for 6000000 expected to be completed in three
years. The following particulars relating to the contract are available:
2018 (`) 2019 (`) 2020 (`)
Materials 675000 1050000 900000
Wages 620000 900000 750000
Transportation cost 30000 90000 75000
Other expenses 30000 75000 24000
Cumulative work certified 1350000 4500000 6000000
Cumulative work uncertified 15000 75000 ---
Plant costing ` 300000 was bought at the commencement of the contract. Depreciation was to be
charged at 25% per annum, on the written down value method. The contractee pays 75% of the value of
work certified as and when certified, and makes the final payment on completion of the contract.
You are required to PREPARE a contract account for three years and total estimated profit/ loss from
the contract.

Q.10. A firm of contractors undertook a contract for ` 600000 on 1st July 2018. The following expenses were
incurred up to December 2018.
Materials charged directly 7500
Materials issued from stores 52500
Wages 30000
Direct charges 3000
The amount of work certified was ` 120000 of which the contractor received 3/4th in cash.
The transactions for the year 2019 were as under.
`
Materials issued from stores 13500
Direct charges 6000
Wages 60000
The cost of special plant issued on 1st January 2019 for the contract was ` 120000. Further work
certified during the year amounted to ` 330000, 75% of which was received. Work done and not
certified as on 31-12-19 was valued at ` 22500. Depreciation is to be provided on plant @ 25%
p.a. Materials at site amounted to ` 15000. The general overhead is to be taken at 5% of the materials
consumed and wages paid during the year. Prepare contract accounts for 2018 and 2019.
(Ans: (2018) – Bal. c/f 22,500, (2019) – P/L – 75,000)

Q.11. PVK Constructions commenced a contract on 1st April, 2019. Total contract value was ` 100 lakhs. The
contract is expected to be completed by 31st December, 2021. Actual expenditure during the period 1st
April, 2019 to 31st March, 2020 and estimated expenditure for the period 1st April, 2020 to 31st
December, 2021 are as follows:
1st April, 2019 to 31st March, 2020 1st April, 2020 to 31st Dec, 2021
Actual (`) Estimated (`)
Material issued 1530000 2100000
Direct Wages paid 1012500 1225000
Direct Wages outstanding 80000 115000
Plant purchased 750000 -
Expenses paid 325000 540000
Prepaid Expenses 68000 -
Site office expenses 300000 -
Part of the material procured for the contract was unsuitable and was sold for ` 240000 (cost being `
255000) and a part of plant was scrapped and disposed of for ` 80000. The value of plant at site on 31st
March, 2015 was ` 250000 and the value of material at site was` 73000. Cash received on account to
date was ` 3600000; representing 80% of the work certified. The cost of work uncertified was valued at
` 540000. Estimated further expenditure for completion of contract is as follows:
 An additional amount of ` 462500 would have to be spent on the plant and the residual value of the
plant on the completion of the contract would be ` 67500.
 Site office expenses would be the same amount per month as charged in the previous year.
 An amount of 1.57.500 would have to be incurred towards consultancy charges.
Required:
Prepare Contract Account and calculate estimated total profit on this contract.

Q.12. A contractor, who prepares his account on 31st December each year, commenced a contract on 1st April
2019. The costing records concerning the said contract reveal the following information on 31st
December 2019.
`
Materials sent to site 258100
Labour engaged 560500
Foremen’s Salary 79300
Plants costing ` 260000 had been on site for 146 days. Their working life is estimated at 7 years and
their final scrap value at ` 15000. A supervisor, who is paid ` 4000 p.m., has devoted approximately
three-fourths of his time to this contract, the administrative and other expenses amounted to ` 140000.
Materials in hand at site on 31st December 2019 cost ` 25400. Some of the material costing ` 4500 was
found unsuitable and was sold for ` 4000 and a part of the plant costing ` 5500 (on 31-12-17) unsuited
to the contract was sold at a profit of ` 1000.
The contract price was ` 2200000 but it was accepted by the contractor for ` 2000000. On 31 December
2019 two-third of the contract was completed. Architect's certificate had been issued covering 50% of
the contract price and ` 750000 had so far been paid on account. Prepare contract account and state how
much profit or loss should be included in the financial accounts to 31" December 2019. Working should
be clearly given. Depreciation is charged on time basis.
(Ans: P/L A/c – 1,06,625, Bal. c/f – 1,06,625, w. uncertified – 2,62,250)
Q.13. A construction company undertaking a number of contracts, furnished the following data relating to its
uncompleted contracts as on 31st March 2020.
Particulars (` in lakhs)
contract numbers
723 726 729 731
Total contract price 23.20 14.40 10.80 28.80
Estimated costs on completion of contract 20.50 11.52 12.60 21.60
Expenses for the year ended 31.3.20:
Direct materials 5.22 1.80 1.98 0.80
Direct wages 2.32 4.32 3.90 2.16
Overhead (excluding depreciation) 1.06 2.60 2.62 1.05
Profit reserve as on 1.4.19 1.5 — — —
Plant issued at cost 5.00 3.50 2.75 3.00
Materials at site on 1.4.19 0.75 — — —
Materials at site on 31.3.20 0.45 0.20 0.08 0.05
Work certified till 31.3.19 4.65 — — —
Work certified during the year 2019-20 12.76 13.26 7.56 4.32
Work uncertified as on 31.3.20 0.84 0.24 0.14 0.18
Progress payments received during the year 9.57 9.00 5.75 3.60
Depreciation @ 20% per annum is to be charged on plant issued. While the contract No. 723 was
carried over from last year, the remaining contracts were started in the 1st week of April, 2019.
Determine the profit/loss in respect of each contract for the year ended 31st March, 2020.
State the profit/loss to be carried to profit & loss A/c for the year ended 31st March, 2020.

Q.14. A contractor has entered into a long term contract at an agreed price of 17,50,000 subject to an
escalation clause for materials and wages as spelt out in the contract and corresponding actual are as
follows:
Standard Actual
Materials Qty (tons) Rate (`) Qty (tons) Rate (`)
A 5000 50.00 5050 48.00
B 3500 80.00 3450 79.00
C 2500 60.00 2600 66.00
Wages Hours Hourly Rate (`) Hours Hourly Rate (`)
X 2000 70.00 2100 72.00
Y 2500 75.00 2450 75.00
Z 3000 65.00 3100 66.00
Reckoning the full actual consumption of material and wages, the company has claimed a final price of
` 1773600. Give your ANALYSIS of admissible escalation claim and indicate the final price payable.

Q.15. W Limited undertook a contract for ` 500000 on 1st July, 2020. On 30th June, 2021 when the accounts
were closed, the following details about the contract were gathered:
`
Materials purchased 100000
Wages paid 45000
General expenses 10000
Materials on hand (30-6-2021) 25000
Wages accrued (30-6-2021) 5000
Work certified 200000
Cash received 150000
Work uncertified 15000
The above contract contained "Escalation clause" which read as follows:
"In the event of increase in the prices of materials and rates of wages by more than 5%, the contract
price would be increased accordingly by 25% of the rise in the cost of materials and wages beyond 5%
in each case." It was found that since the date of signing the agreement, the prices of materials and wage
rates increased by 25%. The value of the work certified does not take into account the effect of the
above clause.
Calculate the 'value of work certified' after taking the effect of 'Escalation Clause' as on 30th June,
2021.

Q.16. AKP Builders Ltd. commenced a contract on April 1st, 2020. The total contract was for ` 500000.
Actual expenditure for the period April 1, 2020 to March 31, 2021 and estimated expenditure for April
1, 2021 to December 31, 2021 are given below:
2020-21 2021-22 (9 months)
(Actuals) (`) (Estimated) (`)
Material Issued 90000 85750
Labour : Paid 75000 87325
Outstanding at the end 6250 8300
Plant 25000 -
Sundry Expenses : Paid 7250 6875
Prepaid at the end 625 -
Establishment charges 14625 -
A part of the material was unsuitable and was sold for ` 18125 (Cost being ` 15000) and a part of plant
was scrapped and disposed of for ` 2875. The value of plant at site on 31st March, 2021 was ` 7750 and
the value of material at site was ` 4250. Cash received on account to date was ` 175000, representing
80% of the work certified. The cost of work uncertified was valued at ` 27375. The contractor estimated
further expenditure that would be incurred in completion of the contract:
 The contract would be completed by 31st December, 2021.
 A further sum of ` 31250 would have to be spent on the plant and the residual value of the pant on
the completion of the contract would be ` 3750.
 Establishment charges would cost the same amount per month as in the previous year.
 ` 10800 would be sufficient to provide for contingencies.
Required:
Prepare Contract account and calculate estimated total profit on this contract.

Q.17. M/s ABID Constructions undertook a contract at a price of ` 171.00 lakhs. The relevant data for the
year ended 31st March 2019 are as under:
(` ’000)
Material issued at site 7700
Direct Wages paid 3300
Site office cost 550
Material return to store 175
Work certified 12650
Work uncertified 225
Progress Payment Received 10120
Prepaid site office cost as on 31-03-2019 50
Direct wages outstanding as on 31-03-2019 100
Material at site as on 31-03-2019 110
Additional Information:
(a) A plant was purchased for the contract at ` 800000 on 01-12-2018.
(b) Depreciation @ 15% per annum is to be charged.
(c) Material which cost ` 130000 was destroyed by fire.
Prepare:
(i) Contract Account for the year ended 31st March 2018 and compute the profit to be taken to
the Profit & Loss Account.
(ii) Account of Contractee.
(iii) Profit & Loss Account showing the relevant items.
(iv) Balance Sheet showing the relevant items.