Ch12 JOB, BATCH AND SERVICE COSTING1.JOB COSTING AND BATCH COSTINGA costing method is designed to suit the way goods are processed or manufactured or the way services are provided.A job is a cost unit which consists of a single order or contract.Job costing is a costing method applied where work is undertaken to customersspecial requirements and each order is of comparatively short duration.The work relating to a job moves through processes and operations as a continuously identifiable unit. Job costing is mot commonly applied within a factory or workshop, but may also be applied to property repairs and internal capital expenditure.Costs for each job are collected on a job cost sheet or job card.Material costs for each job are determined from material requisition notes.Labor times on each job are recorded on a job ticket, which is then costed and recorded on the job cost sheet. Some labor costs, such as overtime premium or the cost of rectifying substandard output, might be charged either directly to a job or else as an overhead cost, depending on the circumstances in which the costs have arisen.Overhead is absorbed into the cost of jobs using the predetermined overhead absorption rates.Job cost informationDirect material costDirect labor costDirect expensesProduction overheadsAdministration, selling and distribution overheadsRectification costs （occasion vs. often）An exam question about job costing may ask you to accumulate costs to arrive at a job cost, and then to determine a job price by adding a certain amount of profit. To do this, you need to remember the following crucial formula.%Cost of job 100+profit 25=price 125Profit may be expressed either as a percentage of job cost （such as 25% 25/100 mark up） or as a percentage of price （such as 20% （25/125） margin）.A batch is a group of similar articles which maintains its identity during one or more stages of production and is treated as a cost unit. Batch costing is similar to job costing in that each batch of similar articles is separately identifiable. The cost per unit manufactured in a batch is the total batch cost divided by the number of units in the batch.2 .SERVICE COSTINGHaving covered job, batch, contract and process costing, we will now turn our attention to service costing, the service being a specialist service provided to third parties or an internal service provided within an organization. This chapter looks at the calculation of a cost per unit of service and at methods of cost accounting in both types of situation.Service costing （or function costing） is a costing method concerned with establishing the costs, not of items of production, but of services rendered.2.1 Service costing is used in the following circumstances:A company operating in a service industry will cost its services;A company may wish to establish the cost of services carried out by some of its departments;2.2 Service costing differs from product costing （e.g. job or process costing） in the following ways:With many services, the cost of direct materials consumed will be relatively small compared to the labor, direct expenses and overheads cost. In product costing the direct materials are often a greater proportion of the total cost;Although many services are revenue-earning, others are not （e.g. the distribution facility or the staff canteen）. This means that the purpose of service costing may not be to establish a profit or loss （nor to value closing stocks for the balance sheet） but may rather be to provide management information about the comparative costs or efficiency of the services, with a view to helping managers to budget for their costs using historical data as a basis for estimating costs in the future and to control the costs in the service department.The procedures for recording material costs, labor hours and other expenses will vary according to the nature of the service.2.3 Specific characteristics of services are intangibility, simultaneity, perishability and heterogeneity.2. 4 Unit Cost Measures（1）Particular problem with service costing is the difficulty in defining a realistic cost unit that represents a suitable measure of the service provided. Frequently, a composite cost unit may be deemed more appropriate.For example, hotel may use the occupied bed-night as an appropriate unit for cost ascertainment and control.（2）Typical cost units used by companies operating in a service industry are shown below. servicecost unit road, rail and air transport servicespassenger/mile or kilometer, ton/mile, tonne/kilometer hotelsoccupied bed-night educationfull-time student hospitalsfatient catering establishmentmeal served2.5 Service cost AnalysisService cost analysis should be performed in a manner which ensures that the following objectives are attained.（1）Planned costs should be compared with actual costs;（2）A cost per unit of service should be calculated;（3）The cost per unit of service should be