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The use of job costing as a tool for the pricing and cost control decisions in the printing industry: the case of Société de Presse et d'Editions (SOPECAM)

par Christian Kuiate Sobngwi
University of Buea - Bachelor of Science 2003

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The costing techniques are the number of tools, processes and procedures that may be used alongside with a costing method to come out with the cost of an activity. There are several costing techniques among which: absorption costing, marginal costing, standard costing or activity-based costing.

For this study we will concentrate on the use of absorption and variable costing used in conjunction with job costing to determine the unit cost of the newspaper Cameroon Tribune. We therefore need to discuss each of these methods to understand the mechanisms involved.


Sometimes referred to as full costing, absorption costing is a costing technique in which all costs are absorbed into the production units and as such both fixed and variable costs are allocated to the cost units. Drury (1992) states that in absorption costing, all manufacturing costs are allocated to products, unsold stocks are valued at their total cost of manufacture and non-manufacturing costs are not allocated to products but are charged directly to the profit and loss account, so they should be excluded from stock valuation.

The procedure to follow when preparing a profit statement using absorption costing can be summarised as follows:

Sales ******

Less: costs

Opening stocks ***

Direct materials cost (fixed and variable) ***

Direct labour cost (fixed and variable) ***

Direct expenses cost (fixed and variable) ***

Indirect expenses (fixed and variable) ***

Less closing stocks ***

Cost of goods sold *******

Gross profit *******


Administrative costs ****

Selling and distribution costs ****

Finance expenses ****

Other non-manufacturing overhead costs**


Net profit ********

Source: Coulthurst15(*) (2001)

The following are some of the arguments used by the proponents for the use of absorption costing, Lucey, T (1992)16(*):

a) Fixed costs are a substantial and increasing proportion of costs in modern industry. Production cannot be achieved without incurring fixed costs, which thus form an inescapable part of production so they should be included in stock valuations. Marginal costing may give the impression that fixed costs are somehow divorced from production.

b) When production is constant, but sales fluctuate, net profit fluctuations are less with absorption costing than with marginal costing;

c) Where stock building is a necessary part of operations, the inclusion of fixed costs in stock valuation is necessary and desirable. Otherwise, a serious fictitious loss will be shown in earlier periods to be offset eventually by excessive profits when the goods are sold.

d) The calculation of marginal cost and the concentration upon contribution may lead to the firm setting prices which are below total cost although producing some contribution. Absorption costing makes this less likely to happen because of the automatic inclusion of fixed charges.

e) SSAP 9 which is about the stocks and Work in progress, recommends the use of absorption costing for financial accounts because revenues and costs much be matched in the period when revenues arise not when the costs are incurred. Also, it recommends that stocks valuations must include production overheads incurred in the normal cause of business even if such overheads are time-related, that is fixed. The production overheads must be based upon normal activity levels.

* 15 Coulthurst, N., Process Costing, Students' Newsletter, January 2000.

* 16 Lucey, T. (1992): Management Accounting (2nd edition), DP Publications, London.

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