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
The purpose of this chapter is to present and analyse the results of the studies conducted on the field. We will first give a rough presentation of the cost structure of SOPECAM for the newspaper Cameroon Tribune. Then, we will direct the study towards the determination of the weekly unit cost for the newspaper. These unit costs will then be analysed using the Student's -T-distribution.
First of all, it seems worthy to mention at this point that there are various processes necessary for the effective production of Cameroon Tribune.
These processes are:
· Editorial work; this is mainly done by the journalistic staff of the company.
· Pre-Printing works; it mainly consist in the preparation of the photographic sheets that will be used to print the newspaper.
· Factory or printing stage; this is the final stage in the production of the newspaper, as its name implies it is at this stage that the newspaper is printed and the pages are arranged following a certain order.
The various materials used in the manufacture of the newspaper are consumed at the various stages of the production process in addition to the labour provided by each employee of SOPECAM, particularly those of the editorial staff. Concerning the work of the other employees, the associated costs are charged to the unit cost of the newspaper following an allocation system based on the labour hours required for the production.
That system is the foundation of the determination of the unit cost currently used by the company; it is determined from an adapted «process costing» method in which various departments of the company have been allocated hourly rates as measure of their contribution to the unit cost of the newspaper. These rates are as follows:
Source: SOPECAM technical department
As it can be observed from the table, there is no information relating to the labour cost of the editorial staff, therefore, this will be one of the weaknesses of our research work as it could not have been possible for us to obtain data relating to that elements as a matter of confidentiality. Therefore we will have to make an estimate of these costs.
The editorial board of SOPECAM is made up of 12 journalists and secretaries whose work can be directly related to the newspaper. Their salaries can be distributed as follows:
Source: the author
From the data obtained after the interview of the executives of the company, particularly the inventory department manager (annex1), the Manufacturing department manager and the head of the Accountancy and budget service, we have been able to determine the various raw materials that enter into the production of the newspaper, the hourly rates for the labour costs and information about the overhead costs incurred by the company. Normally, this study should be oriented towards the determination of the total unit cost of the company, that is the unit cost after having sold the newspaper as shown on the following diagram:
Determination of the purchase cost of raw materials
Determination of the cost of materials used
Determination of the Manufacturing cost
Determination of the cost of units sold
Total unit cost
Source24(*): Fayel, A. & Pernot, D.,(2001) Comptabilité Génerale de l'Entreprise, 12th edition, Dunod, Paris.
Unfortunately, since there is no managerial accounting office in the company, it has not been possible to obtain figures relating to the allocation bases of these overheads; this shortage of information led us to estimate the expenses related to the selling and distribution and even administrative costs of the company.
As such we have the following data:
Source: The author
We can then present the information relating to the materials used to produce the newspaper, they are:
Source: SOPECAM inventory department
The following is an extract of the balance sheet of the company of the period concerned which we cannot state here because of confidentiality; it gives data relating to the annual expenses of the company for the total labour costs, taxes, depreciation, water consumption and many other overhead costs.
Source: SOPECAM balance sheet
Now we are concerned with the determination of the allocation basis for these costs. Because of the lack of precise information, we will use labour as the basis for this allocation. From these data, will try to approximate the weekly and daily figures relating to these expenses so as to be able to arrive at a daily manufacturing unit cost.
We therefore have the following table:
Source: the author
The information given above about those costs are just daily means, and this means that for most of them we will have to estimate their real daily amounts as they are not all fixed costs. The only fixed costs among them is the one relaying to the depreciation of the factory machineries.
As demonstrated in the second chapter, the Overhead Absorption Rate is got from the formula:
OAR=estimated total manufacturing overhead cost/ estimated total units in the allocation base
OAR=(depreciation+ spare parts+ Electricity+ water)/(total number of labour hours used per day i.e.: 24)
We already have data relating to the daily overhead expenses, what we need now is some information about the machine-hours used to manufacture the newspaper so that we can charge some of the overhead costs its unit cost. These machine-hours will also be used as the labour hours required for the production of the newspaper in the absence of data relating to the exact salaries the company workers.
Source: the author
The OARs and associated amounts to be charged for the various expenses are therefore equal to:
Now that we have information relating to the materials, labour, and factory overhead expenses, it is possible for us to determine the daily unit costs using the absorption and variable costing techniques.
* 24 : Fayel, A. & Pernot, D.,(2001) Comptabilité Générale de l'Entreprise, 12th édition, Dunod, Paris.