Sustainability and job costing (Learning Objective 1)
Haas Plastics manufactures custom park furniture and signage from recycled plastics (primarily shredded milk jugs). Many of the company’s customers are municipalities that are required by law to purchase goods that meet certain recycled-content guidelines. (Recycled content can include post-consumer waste materials, pre-consumer waste materials, and recovered materials.) As a result, Haas Plastics includes two types of direct material charges in its job cost for each job: (1) virgin materials (non-recycled) and (2) recycled-content materials. The company also keeps track of the pounds of each type of direct material so that the final recycled-content percentage for the job can be reported to the customer. The company also reports on the percentage of recycled content to total plastic used each month on its own internal reporting system to help encourage managers to use recycled content whenever possible.
The company uses a predetermined manufacturing overhead rate of $9.00 per direct labor hour. Here is a summary of the materials and labor used on a recent job for Jefferson County:
|Virgin materials||60 pounds||$ 3.70 per pound|
|Recycled-content materials||140 pounds||$ 3.50 per pound|
|Direct labor||15 hours||$13.00 per hour|
1. Calculate the total cost of the Jefferson County job.
2. Calculate the percentage of recycled content used in the Jefferson County job (using pounds). If items purchased by Jefferson County are required by county charter to contain at least 40% recycled content, does this job meet that requirement?
Job Order Costing – Sustainability
It is a method of cost accounting, in which cost is allocated and accumulated for each job, work order, or project separately.
Sustainability: It is defined as the capacity to continue an activity without causing threats to the ecological, economical, political, and social environment.
Compute the total job cost of J County Job:
|Details||Quantity||Rate ($)||Total Cost($)|
|Virgin materials||60 Pounds||$3.70 Per pound||222|
|Recycled-content materials||140 Pounds||$3.50 Per pound||490|
|Direct labor||15 Hours||$13.00 Per hour||195|
|Manufacturing overhead||15 Hours||$9.00 Per hour||135|
|Total job cost||1,042|
Compute the percentage of recycle content
|Details||Quantity||Percentage of Recycle Content|
|Recycled-content Materials||140||70% (1)|
• Job J percentage of recycle content is 70%.
• Therefore, J County Job meets the 40% requirement of recycled-contents.