Specific Order Costing

Natalie Gray
Mind Map by Natalie Gray, updated more than 1 year ago
Natalie Gray
Created by Natalie Gray over 4 years ago
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Description

An overview of Specific Order Costing - CIMA C01 Fundamentals of Management Accounting

Resource summary

Specific Order Costing
1 Types of Costing
1.1 Job Costing → Costs per individual job ie plumber, electrician etc JC are ‘one off’s’, unique / specific / individual to customers needs. Uses job cards or job sheets to record all labour, material and overheads e.g electrician pricing a particular job.
1.2 Batch Costing → Producing a certain quantity of uniform/identical units, specific to customer's request. They have to be unique in some way and not mass produced e.g a fleet of limited edition cars.
1.3 Contract Costing →A form of JC but where the job will have a long term scale and is completed over more than one financial period e.g Construction of Wembley Stadium.
1.3.1 Difference between JC = much longer timescale, sales value is much larger and sales invoices are often raised and progress payments are made by a customer.
1.3.2 Price is normally negotiated in advance, however at various stages of completion, invoices will be raised for the value to date. This is calculated by: Value of work - Retentions and payments made to date = Payment due by Customer
1.3.3 WORK IN PROGRESS (CONTRACT)
1.3.3.1 DEBITS → These are EXPENSES e.g. Opening inventory of Raw Materials, Opening Net Book Value, Materials Delivered to the site, Tools Delivered to the site, Supervisors Salaries, Direct Labour and Subcontractors costs, Hire of Plant and Machinery and Apportioned Overheads.
1.3.3.2 CREDITS → These are: Unused raw materials returned back to Stores, Raw Materials Transferred, Closing Inventory, Closing Net Book Value of Non-Current Assets

Annotations:

  • Depreciation. Certain assets, such as buildings and equipment, depreciate, or decline in value, over time.
1.3.3.3 CALCULATING PROFIT ON CONTRACTS
1.3.3.3.1 This is normally dependent on the percentage of completion of the contract:
1.3.3.3.1.1 Profit or Loss (Forecast) for a Contract: Contract Price - (Cost Incurred to date - Future Estimated Costs) = Contract Profit or Loss
1.3.3.3.1.1.1 Contract profit/loss x (Value to date / Contract Price) x 100 = Profit in relation to the % of work completed
1.3.3.3.2 If the outcome of the contract is expected to be a LOSS then this must be reflected and recognised in the Income Statement.
2 Formulas
2.1 Gross Profit = Sales - Cost of Sales
2.1.1 Sales Margin% = Gross Profit / Sales x 100%
2.1.1.1 Mark Up % = Gross Profit / Cost of Sales x 100%
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