Читать книгу Cost Accounting For Dummies - Kenneth W. Boyd - Страница 96

To implement job costing in a manufacturing company, first think about dividing your costs into two piles: direct costs and indirect costs. In a manufacturing setting, you have direct materials and direct labor you can trace directly to the job. So far, so good. Next, think about what’s driving indirect costs. You spread those indirect costs to the work you perform.

As an example, Reliable Fencing manufactures and installs wooden fences for the residential market. Reliable has a manufacturing component and a service component.

Reliable provides the customer a cost estimate. The estimate is based on the type of fence, fence height and length, and labor hours needed for installation. Because nearly every job has a different set of costs, Reliable Fencing uses job costing. This system allows Reliable to compute costs accurately. And from that, Reliable can calculate a selling price that generates a reasonable profit.

Imagine that you’re the manager of Reliable Fencing. The Johnsons have requested an estimate for a fence in their backyard. To provide the estimate, you discuss the fence models and types with them. You measure the length needed for the fence and the height requested. Finally, you consider any extra labor costs you might incur. For example, the Johnsons would like the fence to jog around several trees so the fence doesn’t damage the tree trunks.

The Johnsons’ fence is the cost object. Reliable will incur costs if the client orders a fence and work starts on the project. But before getting an order, you have to provide a cost estimate.