Disadvantages of Subscription-Based Banking
In the previous articles, we have learned about what subscription-based banking is. We also know the various advantages that this revenue model brings for banks as well as for corporate customers. However, there are several commercial banking experts who believe that the subscription banking model also has its own fair share of problems. Hence, in […]
Finance Functions – Investment, Financial, Dividend and Liquidity Decisions
The following explanation will help in understanding each finance function in detail Investment Decision One of the most important finance functions is to intelligently allocate capital to long term assets. This activity is also known as capital budgeting. It is important to allocate capital in those long term assets so as to get maximum yield […]
The Impact of Tariffs on the Energy Sector
The American energy sector has really taken off in the past few years. The discovery of “fracking” or hydraulic fracturing has completely changed the dynamics of the oil and gas industry. The end result has been a historic boom in the oil and gas industry. For the first time in many decades, America has become […]
Advantages of Job order Costing
Possible To Appraise The Job: Job order costing is the only way that companies can appraise the jobs that they are about to take up. In the absence of a job order costing system, companies will not have enough data to ascertain whether or not the job will be profitable. Job order costing system enables […]
What is Payback Period ?
We have earlier discussed the fact that Net present Value (NPV) is considered to be the gold standard when it comes to financial decision making. If a project has an NPV greater than zero then it is supposed to be a financially viable project and the firm must invest its resources towards that project, if […]
The job begins with a quotation given to a client. For the client, all that matters in the quotation are the costs involved. However, for the contractor, quotation is almost a research document. Giving out quotations requires estimation. Contractors usually have fixed methodologies for estimating these costs. A study of past quotations can tell if the contractor has been making the estimations correctly or have they over or under priced certain jobs.
Sales order is document which signifies that the client has accepted the quotation. Work on a job can only be started only after the sales order has been received by the concerned department. Without the sales order, resources will not be allocated to this job.
A job cost sheet tracks the costs as and when they are incurred throughout the job. The costs are updated regularly as and when they are incurred. Out of these, labor and material costs are actual costs whereas overheads are estimates. The company may have to correct its estimates of overhead allocation later.
Material requisition forms help track where the material is being used. Since the material requisition form specifies the exact job for which material is being used, material costs can be accurately recorded. In the absence of material requisition form there will be immense confusion over which material was used for which job and what was the cost of that material.
Companies also keep a track of the freight charges that they have incurred for a specific job. Each freight ticket needs to be authorized with a job code and the costs must be added to the job cost sheet. In the absence of these tickets allocation of these costs will be a problem.
Labor tickets track the time that different laborers with different skill level have spent on the job. Based on this information, the labor cost can easily be allocated to different jobs.
Invoice is the document which signifies the completion of a job as requested by the client. When the invoice is accepted by the client, the contractor can consider the job complete. It is here that the contractors are legally allowed to recognize the revenues as well as the costs that were incurred in the job. Based on when the customer is paying, the cash account or the accounts receivable amount needs to be debited.
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