Job Order Costing Essay Example | Topics and Well Written Essays - 2250 words

Job Order Costing - Essay Example In job order costing, the key is that the work is done to the customers specifications. As a result, each job tends to be different in nature. Even if the job may seem to be exactly the same at first, often a customer will want a worker to do something different than what was originally thought to be done. For example, â€Å"job order costing is used for construction projects, government contracts, shipbuilding, automobile repair, job printing, textbooks, toys, wood furniture, office machines, caskets, machine tools, and luggage. Accumulating the cost of professional services (e.g., lawyers, doctors and CPAs), also fall into this category† (MAAW, â€Å"What Is a Cost Accounting System?†). Job Order Costing is used by companies where products or services are identifiable by individual units or batches—auto repair, tax return preparation, case in an attorney’s office, ship construction, etc. The costs attributable to a particular job are assigned directly to it. When a job produces a specific quantity for inventory, job order costing permits the computation of a unit cost for inventory costing purposes. When jobs are performed on the basis of customer specifications, job order costing permits the computation of a profit or loss on each order. Since costs are revealed as an order goes through production, these costs may be compared with estimates which were made when an order was taken. Job order costing thereby provides opportunities for controlling costs. It allows the person to help try to keep costs as stable as they can, yet still find a way to make a profit. This ability helps keep both the worker and customer happy, and helps promote a better relationship between the contractor or professional and the person who is paying for the work. This can also help keep costs low, because the customer does not need to pay for services they do not need, even if the professional is capable of doing them. This way, the