E6.28 Job costing: car repair business Prestige Auto Repair Ltd is a car repair workshop specialising in the repair of luxury European motor vehicles. The company estimates the costs of repair services by recording the cost of labour used to complete the job and the cost of the spare parts used on the repair job and allocating overheads to jobs at 40 per cent of labour cost. Overheads include the wages of the receptionist and secretarial staff, as well as depreciation of a wide range of expensive technical equipment. During the last week, the company completed two repair jobs: an engine replacement and a complete overhaul of a vehicle's braking system. The engine replacement involved extensive use of equipment, while the brake overhaul was largely a manual process. The direct costs assigned to the two jobs were as follows: LO6.7 Engine replacement Brake overhaul SI 100 S 180 Labour cost of mechanic S1000 Spare parts S1 600 Required: 1. Estimate the cost of each job. 2. Do you think the costing system provides reliable estimates of the costs of the resources used to complete the two jobs? Explain your answer.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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