Question

What is your understanding of the purpose and usefulness of job costing? Explain in your own words how you interpret this concept?

Answer 1

JOB COSTING

MEANING OF JOB COSTING

Job costing is the costing technique used to track the cost and revenues by job. It is an expense monitoring system that assigns manufacturing costs to each product. Job costing system determine manufacturing costs systematically by dividing them in different heads like overhead, direct material & direct labour cost and estimating them at their actual value.

PURPOSE OF JOB COSTING

The main purpose of job costing system is to ascertain the profit or loss made on each job. Such a system of job costing technique can be used in any industry ;especially in the field of service industry. Under such costing system, the cost of job is compared with the estimated cost to know whether the estimation was defective or the actual cost incurred is excessive. Job costing purposes is to improve efficiency of jobs and to facilitate the revision of estimates. In job costing cost may be accumulated either by batch or by job. The job costing also helps in the profit maximisation of business, since it is the primary objective of any business.

USEFULNESS OF JOB COSTING

• Job costing used to check whether the cost of production exceeds the overhead and the price of the materials, inroder to make profit for the business.
• Used to maintain the development of each job, by providing a seperate account for each process of the job .
• Job costing is used for the detailed analysis of all types of costs that are present throughout the manufacturing process.
• Used to prevent the duplication of work by helps in the estimation of a similiar job.
• Used to detect and correct the defective work in an organization.
• Used to evaluate the quality of work through various statistical techniques.
• Used to helps the supervisors to keep track of various components, such as money, material and the performance of employees.