Question

Managerial Accounting In-Class Project
Choose a product or service that would use job order costing and that you are familiar with. (Some examples include: landscaping project, bathroom remodel project, repainting a room in your house, custom built doghouse, custom wedding dress, etc.) You will represent the company who is providing this product or service to your customer.
Part I
If you are working with another person, ask these questions. If you are working on this independently, answer for yourself.
1) What is the product/service you are interested in purchasing?
2) How much are you willing to pay for this product/service?

Part II
Write out the process to manufacture the product/provide the service to the customer. Be detailed so you include all materials needed and the length of time and number of people required.

Part III
Complete a job cost sheet for the job. Look up costs for the materials online or estimate what they are. Estimate your labor cost. Allocate overhead costs at 150% of the direct labor cost.

Part IV
Reflect on this process. Why does job costing make sense for this product or service?

Answer 1

PART 1

1) What is the product/service you are interested in purchasing?

ANS:

Service choosed: Repainting a room.

Area: Wall: 2* Width 4.2 * height 3

Wall: 2* width 2.7* height 3

Ceiling: Width 4.2* 2.7

2) How much are you willing to pay for this product/service?

The market rate for painting 1 M2 area is Rs 250.

Here the room's area = 2*4.2*3 + 2*2.7*3 + 4.2*2.7

=25.2+16.2+11.34

=52.74 M2

Hence the amount I am willing to pay = 52.74 M2 * Rs 250

= 13,185

Part II
Write out the process to manufacture the product/provide the service to the customer. Be detailed so you include all materials needed and the length of time and number of people required.

Ans:

For Painting a room,

Materials required:

• mild detergent soap to clean the wall
• Primer
• Paint
• Paint roller
• painter’s tape

LAbour:

2 person for 8 hours

Part III
Complete a job cost sheet for the job. Look up costs for the materials online or estimate what they are. Estimate your labor cost. Allocate overhead costs at 150% of the direct labor cost.

COST SHEET
FOR PAINTING A ROOM
Room Area: 52.74
Particulars	Amount	Amount(in Rs)	Calculation
Direct material:	2385
Mild detergent		250	Cost of 250 ml bottle
Paint primer		35	For 1 litre primer cost Rs 140. It can cover 215 Sq meter. Our area is 52.74 Sq. m. Hence, approximately 250 ml is required for this room. However primer is not avilable in market in 250 ml quanity. So we have to buy 1 litre primer. Hence the cost 750 ml is added in other expenses
Paint		1500	Approximately 3 litre paint is required. Cost of 1 litre is Rs 500
Paint brush		400	Cost for 1 roller brush
Painter's tape		200
Direct Labor	2000		2 person * 1000/day
Direct expenses	0
Prime cost	4385
Overhead cost	3000
Other expenses	105
Total Cost	7490

Part IV
Reflect on this process. Why does job costing make sense for this product or service?

By job costing, we can be more accurate about the cost of service or product we produce or consume.

It can operate as a control over the cost as it gives you an estimate of your cost and profits

Analysis of this case:

When we calculate the cost of service with the market rate, it was Rs 13,185. However when we took the calculations with a cost sheet, we could estimate the cost as Rs 7490. There was a difference of Rs 5695.

Therefore its always better to use a cost sheet.

Note: I used the rates available in India since I am not sure of the student's region.

please modify the rates in answer as per the market rates in your region