STC/KPA

Job Costing

Definition:
Job costing may be defined as the process of forecasting the expenses that must be
incurred to manufacture a product. These expenses take into consideration all expenditures
involved in design and manufacturing, with all the related service facilities such as pattern
making, tool making, as well as a portion of the general administrative and selling costs.

Object of Job Costing in Railway Workshop:

The object of job costing is:

(a) to compare the man hours and the costs of similar articles manufactured from time to time

in the workshop and finding out reason for variation in labour hours and cost;

(b) to compare the cost of articles manufactured in one workshop with those manufactured in

other workshops or with the market price of similar articles; and

(c) to determine issue-prices of components manufactured in workshops for issue to store for

stocking purpose to meet demands of workshops at the time of repair of Rolling Stock.

Importance of Costing:
The costing data enables the management to

(i) assess whether the unit cost of manufacturing is as estimated and how it compares with the

historical data of previous years.

(ii) identify factors/inputs which have caused a variation in the unit cost.

(iii) assess benefits of incentives given, mechanization done, material utilized.

(iv) assess whether the activity as a whole or in part needs to be continued, depending upon

the economics of the production.

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Principal Documents employed for costing purpose:

(i) Route Card:

It is an authority for the shop to undertake manufacture of components/assembly, for

which it is issued. It is printed and issued by Production Control to the shop through Progress
Office and thereafter it travels with the job till its completion. Then it is sent to Accounts
Office for completing cost sheet.
Form W 916

ROUTE CARD

Control Work Order No. Quantity On order Date Reqd. Requisition No. shop
Latest starting date Requisition Date Forwarded
signature
Sub work order Name of Part Material Issued
date Signature
Component of Drawing No. Priority Material Received
date Signature
Matle Specn. Material size and length/piece Posted
date Signature
Route Delivery to Kgs. Qty. Qty. REJECTS Inspectors
produced passed Mat. Man. Signature
Dept. M/C Class Operation Time No. off.
P.
...................................
A
.........................................
P.
............................. ...................................
A
................................ .........................................

Note: Operating Times and Prices given are "for each" Unless otherwise stated.

Reverse of from w. 916

Class of Stores P. L. No.

Qty. Demanded Kgs. Rate Unit Value Closing
Balance
Qty. Issued

(ii) Job Card/Squad Summary Card:

For each operation included in the Route Card, Job Cards/Squad Summary Cards are
issued printed (by Progress Office) on which time taken is recorded with the help of Time Clocks
and direct labour hours spent on the job determined. Direct Labour Cost is arrived by multiplying
the time taken with average hourly rate of the category. Both direct labour hours and indirect
labour cost is posted in the Cost sheets. In addition, the incentive bonus earned by workers is
also posted from the Job Card.

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(iii) Material Requisition:

It is an authority for the Shop Foreman to draw materials as specified there in accordance
with the route card and is issued adrema printed by the Production Control to the Shop through
the Progress Office. It is valued by the Stores Accounts Officer on the basis of book rate and
forwarded to the Workshop Accounts Office where it is made use for posting direct material cost
in the Cost Sheet.
From W 921

MATERIAL REQUISITION

Control Work Order No. Quantity On order Date Requd. Requisition No. shop
Latest starting date Requisition Date Forwarded
signature
Sub work order Name of Part Material Issued
date Signature
Component of Drawing No. Priority Material Received
date Signature
Matle Specn. Material size and length/piece Recorded
date Signature
Route Delivery to Kgs.
Issue Note No........................... Dat e .....................................................
P. L. No..............
Value Price Proof Class of Store Qnty. Demanded Qty.
Issued

Depot Closing Balance

Quantity .........................................

Date ..............................................

(iv) Material Tag:

It is adrema print by Production Control and issued to Shops through Progress Office. It
remains tagged with material till the component/assembling is returned to stores when it is
valued at the predetermined rate by the Stores Accounts Office and sent to Workshop Accounts
Office in support of Advice of credit. In the Workshop Accounts Office it is posted in the Cost
Sheet to determine the extent to which the price list rate need revision.
Form W. 923

MATERIAL TAG

Control Work Order No. Quantity On order Date Requd. THIS LABLE STAY WITH WORK
Sub work order Name of Part
Component of Drawing No. Priority
Matl Specn. Material size and length/piece
Route Delivery to Kgs.
Receipt Note No D ated . ... .... ... .... ... .... ... .... .... ... .... ... .... ... .... ... .... ... .... ..

Value Proof Class of Store Qnty. Ordered Qnty. Recd.

Depot Closing Balance

Quantity .........................................

Date ..............................................

Signature ........................................

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(v) Advice Note of Retuned Stores:

It is used for return of scrap or surplus materials to stores and getting credit there form
for posting in the Cost Sheet.
Form W 926

ADVICE NOTE OF RETURNED STORES

REJECTED ( OTHER STORES

Control Work order No. Sub-work order No. Unit Wt. Returned kgs. Wt. Regd. in word
kgs.
Description Allocation
P. L. No. & CLASS Rate VALUE
Rs. P.
MATERIAL RETURNED MATERIAL RECEIVED IN WARD POSTED
Date Signature Date Signature Date Signature

(vi) Foundry Out-turn Statement:

It is used for ascertaining and posting in the Cost Sheet, the cost of ferrous and non-
ferrous castings.

(vii) Cost Sheet:

It is document issued by the Production Control in respect of job for which cost is to be
determined. It covers the whole field of record of productive activity and is used to determine
cost per unit.
Form W-934
COST SHEET
(for articles manufactured for stock)

Railway ...............................
Workshop ............................
Control W. O. No...................
Sub Work Order No................

Shop No. Month Labour Hours Labour Cost Material Cost On Cost Total cost Col 4 to
Col. 8
Direct Wages Piece Work profit Labour Material
1 2 3 4 5 6 7 8 9

.
Total
Credit received for Difference between Unit cost of Manufacture
supply of articles to the actual total cost Labour Material On Cost Total
stores and the credit recd.
col 9 minus col 10
10 11 12 13 14 15

Total

Unit Cost @ approved Cost Card Posted

Section officer (Accounts) W.A.O

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(viii) Works Manager’s Cost Sheet:

It is posted from Cost Sheet and is used for comparison of cost from time to time and
from workshop to workshop etc.
Form W. 944

.............Railway
COST CARD

UNL No. ............................... Description............................ Drawing No.............................

Date of Number Order No. Estimated labour Estimated labour Estimated Estimated
Manufacture ordered time Cost Material quantity Cost
1 2 3 4 5 6 7 8 9

.
Actual Total cost Labour time per unit
Material Labour on cost Total cost Estimated Time allowed Time taken Percentage
Remarks
Cost Cost Actual Wastage
8 9 10 11 12 13 14 15 16

Costing Procedure:
1. A work order system is used in the workshops for costing procedures and system. A work

order is a unit used for recording and analyzing workshop expenditure. It is also an authority

under which work is undertaken in the workshops. There are many types of work orders

each serving a specific purpose for booking and analysis of expenditure in the workshops.

2. The main elements of cost which go into any of the activity undertaken in the workshops are:

(a) Materials

(b) Labour

(c) On costs

(a) Material cost: Material Requisitions Notes and Issue notes are used for drawal of Stores

from the Stores depot showing among other particulars the work order number. For non-

stock items the cost of materials are charged directly to the work order concerned. The

document used for the purpose is the Receipt note.

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(b) Labour: Accounts of labour employed in the workshops are maintained in two series:-

(i) for the purpose of payment.

(ii) for the allocation of labour charges to the jobs upon which the workmen are

employed.

(c) On-cost(Overheads): In addition to the expenses on direct labour and direct materials

there are various items of expenditure which cannot be directly charged to the cost of

article manufactured or work done e.g. indirect material, indirect labour. Charges of this

nature are termed as “On Cost” which in the Railway workshops are classified into three

categories:-

(i) Shop-on-cost:- This includes all on-cost incurred within an accounting unit such as a

shop or department or a section. These are mainly indirect material, indirect labour

and other indirect charges which cannot be directly charged to a job and which can

be identified with a particular shop or section.

(ii) Proforma-on-cost:- The indirect expenses which are normally included in the cost of

manufacture under the principles of commercial costing but are not so included in the

cost of works done in Railway Workshops are classified as Proforma-on-cost charges.

Under the Railway classification rules such expenses are charged of directly to the

final heads of working expenses.

(iii) General-on-cost:- This includes all indirect costs other than Proforma-on-cost that is

incurred in common with more than one shop or department within a workshop.

Job Card:
Job card is defined as the record that shows the time worked by workmen on individual
operations. These are used in shops covered by the Incentive Scheme. Job cards are printed by
the PCO separately for each operation indicated on the route card and sent to the shop
concerned. The job cards for section will be kept by the Sectional Chargeman. When an operator
has to commence an operation, the chargeman will give it to operator after entering his Ticket
No. and after punching ‘ON’ it will be handed over to Time Booth Clerk. When the job is
completed the worker will take the job card from Time Booth for punching ‘OFF’. And after
punching it will again handed over to Time Booth. The time booth clerk will book the time put in

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by the worker from day to day on the job card in the space provided. Now the card is handed
over to stage inspector for inspection and according the outturn passed under his dated initials.
The time booth clerk will then total up the booked, and send it to the Accounts Office for further
calculation of unit cost of the work and incentives of the workers etc.

Q. What is Route Card? What purpose does it serve?

Ans. The route card is the authority for the shops to undertake manufacture of the component/
assembly for which it is issued. This is an exact replica of the Process sheet with adequate space
provided for the inspection staff to record the results inspection or checking on completion of
each operation. The Route Card is issued by the Production Control to the shop initiating
manufacture and thereafter it accompanies the material till its delivery to stores on completion
of all operations. The Stores Depots acknowledges, on the Route Card, receipt of the
component/assembly sent to the Depot from the Shops. The Shop Foreman thereafter passes on
the Route Card to the Progress Office. The Progress Office sorts out the Route Cards by different
control work orders after scrutinizing that necessary reference of material requisitions and
piecework job cards have been entered therein and forwards the Route Cards to Job Costing
Section of the Workshop Accounts Office. Normally, only one Route Card is issued to cover the
number of components/assembly against the sub-work order.

Route Cards serve the purpose of a completion certificate in respect of individual sub
work orders. A progressive record of the receipt of route cards, their scrutiny and costing of
relevant cost sheets, point referred to the Works Manager for the clarification and final disposal
should be maintained in the job costing section so as to be readily in a position to ascertain the
movement of the cost sheets.

Q. What is Cost Card? Explain briefly.

Ans. From the information available in the route card and the cost sheet, particulars of the
manufacture of articles should be posted by the job costing section in the cost cards to be
maintained in Form W-944. This card would enable the Workshop authorities to see if there is
any improvement as successive orders passes through the Workshops. These cards should be
used for fixing and revising prices of the workshop manufactured articles.

The variations in cost or man-hours per unit from work order to work order, if significant,
should be immediately investigated with reference to the operation laid down in the Route
cards, vouchers for labour and materials charges, man-hours and average rates for labour, the
quantity, specifications and rates for material utilized, etc. If the investigation does not reveal
the causes for variations, which can be considered as reasonable, satisfactory clarification should
be obtained from the Office-in-charge of workshops for further scrutiny.

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