Elements of the job costing method

Operation Cost Method It is generally believed that the operation cost method is a job-based management information system. It is job-centered, and the division of jobs starts from product design to material supply; from each link of the process, assembly, quality control to shipment and sales of the whole process, through the confirmation and measurement of jobs and job costs, and finally calculate the relatively accurate product costs. At the same time, through the tracking of all the roles associated with the product, in order to eliminate non-value-added operations, optimize the operation chain and the value chain, increase the value of the demand side, to provide useful information, to promote maximum savings, to improve the decision-making, planning, control capabilities, in order to ultimately achieve the purpose of improving the competitiveness of the enterprise and the ability to make a profit, increasing the value of the enterprise.

Under job costing, the costing procedure is divided into two major stages of six steps. The first stage is to allocate the manufacturing costs to homogeneous job cost pools (same cost) and calculate the allocation rate of each cost pool; the second stage is to utilize the allocation rate of the job cost pools to apportion the manufacturing costs to the products and calculate the product costs. The practical steps are as follows:

1. Define, identify, and select major jobs;

2. Assemble resource costs to homogeneous cost pools. These resources are usually available from the general ledger of the organization, but the general ledger does not have the cost of the resources consumed to perform each job;

3. Select the cost drivers and calculate the cost pool allocation rate. Select a cost driver from which to calculate the cost allocation rate. Cost measurement takes into account the ease with which cost driver materials can be obtained; the higher the correlation between the cost driver and the resources consumed, the less likely it is that existing costs will be skewed;

4. Calculate the cost-bank allocation rate;

5. Allocate the costs in the job bank to the product; Cost of a cost driver for a product = Cost of a cost-bank allocation rate X Quantity of cost drivers

6. Calculate the cost of the product. The goal of job costing is to ultimately calculate the cost of the product. Direct costs can be treated as a separate job cost pool. The product cost is calculated by adding the product's direct costs to the product's share of manufacturing overhead. The cost of a product = ∑ cost driver cost + direct cost

The basis for the emergence of the job costing method, as well as its promotion of the accuracy of cost allocation, the decision-making relevance of the cost information it can provide, the provision of meaningful non-financial information, and the expansion of the scope of cost services, etc., suggests that the cost control system compatible with the modern enterprise should be based on the basis of the management of the job; it will form the product of the It takes each operation as the responsibility and control center, analyzes the root cause of cost, distinguishes value-added operation and non-value-added operation, establishes optimal and dynamic value-added standard, evaluates the operation performance from the financial and operational aspects, and changes the operation mode continuously, so as to achieve the goal of continuous cost reduction. For this reason, job costing method has a better application prospect. In the general application, the problems that should be considered by the job cost method should be analyzed first, so as to prepare sufficient conditions for the smooth implementation, and insist on the combination of the job cost method with other management accounting methods, such as target cost, improvement cost, life-cycle cost, and limitation theory. In the specific application, in addition to the application in the manufacturing industry, it can also be tried in the service industry. Such as job costing method used in the banking industry in the international financial sector has many successful cases, its application in the banking industry is of great significance. The application of job costing in the bank can be divided into strategic cost management, product costing, customer level profitability analysis and daily cost management and other aspects.