Clarification details
Updated December 2016. This document has been updated to address issues that have arisen from moderation.
Job Cost Elements
The elements relevant to this standard may include:
- internal control components of a materials requisition, time sheet or job cost card
- selecting an appropriate basis for allocating overheads
- correctly allocating costs to jobs
- under- or over-applied overhead.
Context
Students may be provided with resource material based on a fictitious or on an authentic business, or might visit or interview a local business that operates a job-cost subsystem. The teacher will need to create financial information to enable calculations. The processing and narrative aspects of the standard must be based on the same context.
Justifying job cost elements
In determining a grade, the teacher should consider whether the student has:
- explained job cost elements that are relevant for the specific entity, and the purpose of those elements within the entity?
- identified the basis on which calculations were prepared?
- cited relevant examples from the processing to explain why and/or how elements assist the entity to maintain its viability?
- provided valid and relevant reasons as to why certain elements, such as the cost driver, have been chosen and the significance to the entity of inappropriate selection?
At Achieved, the focus is on job cost elements that are relevant to (that is, actually used by) the specific entity, and how they assist the entity to maintain viability. At Merit, the student extends their explanation to explain why the entity uses the specific elements, and why they assist the entity to maintain viability. Excellence requires a justification of specific job cost elements. For example, a student could consider what cost driver is used to allocate overheads, and the consequences of using or not using the appropriate cost driver; the implication of the overhead application, and the consequences on the entity maintaining its viability of overheads being under- or over-applied.
The assessor should apply an holistic judgement around the student’s understanding of how the entity’s job costing subsystem contributes to its ability to maintain operations. ‘Could’ or ‘should’ statements, such as ‘XYZ should use a time sheet to record all direct labour for the job’, do not provide evidence of understanding. All responses should be placed in the context of what is actually occurring within the business