1998 Volume 6 Issue 2 Pages 47-74
The traditional method of measuring product cost under job-order costing has the following characteristics. First, at the end of costing period, even if the whole of production quantity of job order is not finished, both the finished goods and the work-in-process are regarded as the ending work-in-process. Second, the shrinkage is not measured. Third, in the case that the spoilage is reworked, the spoilage costs are not measured, and not only the spoilage but non-spoilage are charged with rework cost. Fourth, when the all of production quantity of job order are spoiled and when the majority of production quantity of job order are spoiled, the same measurement methods are not adopted. Moreover, the methods are not consistent. Fifth, in the case that a part of production quantity of job order is spoiled, the net spoilage cost is calculated by deducting the disposal value of the spoilage from the substitute product.
The study investigates the concepts of spoilage and shrinkage, and proposes the product costing methods, on the situation that normal spoilage and normal shrinkage arise, to which the method of non-neglecting spoilage and shrinkage is applied under job-order costing, exploring those characteristics. Under the proposed method, the completion rate is worked into job-order costing, the equivalent whole units of each job order are adapted, and the cost of a job order is separated into finished goods cost, ending work-in-process cost, spoilage cost, and shrinkage cost, and, subsequently, the normal net spoilage cost and the normal net shrinkage cost are charged to product cost on the basis of the principle of the causal relationship.
