The process plant division of a group of companies has built a food packaging machine to a customer’s requirements. A price of £49 000 had been quoted with the intention of achieving 25% profit on the selling price.

Production overhead is absorbed at the predetermined rate of £10 per direct labour hour in the Assembly Dept. and £15 per machine hour in the Machining Dept.
Commissioning costs, i.e. installation and initial running-in of the machine at the customer’s site, were £750 and these are to be treated as a direct production cost.
Selling and general administration costs are charged to jobs at the rate of 333% of production cost.
Required:

(a) prepare a job order cost sheet and insert on it the information given above in such a way as to be useful to management;

(b) explain ‘job costing’ and ‘batch costing’.

Transcribed Image Text:

Customer: Customer's Order No: Job Order No: Date work started: Bond Foods Limited 7206 dated 3rd February, 19_6 1412 5th March, 19_6 Date job completed in factory: 29th April, 19_6 Date delivered: Date commissioned: 2nd May, 19_6 6th May, 19_6 March April Materials used: Machining Dept. 2 900 700 Assembly Dept. Direct wages rate per hour: 1.900 1400 Machining Dept. 4 4.40 Assembly Dept. 5 5.25 Hours Hours Direct labour hours: Machining Dept. 200 100 Assembly Dept 50 500 Machine hours in Machining Dept. 350 180 Technical drawings (direct cost) 2 115