## Job Costing — Collecting Costs & Handling Defectives
After direct material, a job absorbs labour and overheads, and may produce spoiled/defective work that must be accounted for.
### B. Labour Cost
- All direct employee (labour) cost is collected from job time cards / sheets and accumulated for a period or volume of activity.
- Time booked in job-time and idle-time cards is valued at appropriate rates and entered into the cost accounting system.
- Indirect labour costs are taken from the payroll books and posted against standing-order / expense-code numbers in the overhead ledger.
### C. Overheads
- Overheads are collected under suitable standing order numbers; selling & distribution overheads against cost account numbers.
- Total overheads are apportioned to service and production departments on a suitable basis.
- Service department expenses are re-apportioned to production departments, and the total production-department overhead is then applied (absorbed) to products on a realistic basis.
### D. Treatment of Spoiled & Defective Work
| Circumstance | Treatment |
|---|---|
| Loss due to normal reasons | If a normal defective rate is established and actuals are within the normal limit, the cost of rectification/loss is charged to the entire output. If defectives substantially exceed normal limits, the excess (beyond normal) is written off to the Costing P&L Account. |
| Loss due to abnormal reasons | Treated as abnormal cost — the cost of rectification/loss is written off to the Costing P&L Account. |
Key principle: normal losses are absorbed by good production; abnormal losses never burden the product cost — they hit the Costing P&L.