Job Order Costing and Process Costing Methods

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Question 1
Most manufacturing companies use both job order costing and process costing methods in different scenarios to determine their costs. The job costing method is highly used when a manufacturing company deals with special manufacturing jobs where prices will be allocated to this order and not the produced units. The companies that would use job costing are those that manufacture many different products and those in the service industry. Examples of companies following the job costing method include repair workshops, shipbuilding companies, hospitality and event management companies, printing press, and automobiles.
Overhead allocation rates are determined on the basis of an allocation base, which means that known cost is used by accountants as a proxy for the allocation of unknown costs. For example, for the manufacturing of each product, direct labor hours are known. Therefore, labor hours are used as an allocation base if accountants presume that the total overhead used by each product is proportional to the labor hours (Walther & Skousen, 2010). Examples of two companies in Saudi that use the job costing method are AG Enterprises and Saudi Chevron Phillips Company.
Question 2
* Number of units started and completed
This is given by the units started in march less ending WIP.
=144000-13000
=131000
* EUP for DM and CC using FIFO and WA methods
EUP using FIFO method

Physical Units

Direct

Material

Conversion

Cost



℅ of completion

Equivalent Units

℅ of completion

Equivalent units

Beginning WIP

16000

-

-

30℅

4800

No. of units Started and completed

131000

100℅

131000

100℅

131000

Ending WIP

13000

100℅

13000

50℅

6500

Total (EUP)

160000


144000


142300

EUP using Weighted Average

Physical Units

Direct