Question

Job order costing accumulates and records costs by job and assists managers in evaluating actual and expected costs related to direct materials, direct labor, and factory overhead costs.

Select a company that would employ a job order costing system. Research the company and discuss why a job order costing system is the 'correct' fit for that organization. Discuss a product the company sells and discuss what direct and indirect costs would be included on the job cost sheet.

Answer 1

Job order costing or job costing is a system for assigning and accumulating manufacturing costs of an individual unit of output. The job order costing system is used when the various items produced are sufficiently different from each other and each has a significant cost.

Job order costing is used in situations where the company delivers a unique or custom job for its customers. Every customer is treated uniquely and delivered products to specifically suit their individual needs.

In job order costing, the company tracks the direct materials, the direct labor, and the manufacturing overhead costs to determine the cost of goods manufactured (COGM).

As an example, Kirkland & Ellis law firm can use job order costing because every client is different and unique.

advantage of job order costing is that it allows managers to calculate the profit earned on individual jobs, helping them to better ascertain whether specific jobs are desirable to pursue in the future.

Beacause the firm accepts orders or jobs for different clients, the assignment of cost to clients becomes a difficult task. In these circumstances, the cost record for each individual job is kept because each job have a different product and, therefore, different cost associated with it. Hence Job Order Costing is useful.

Direct costs are expenses connected directly to an attorney such as compensation, bonus, payroll taxes and time and expense (T&E). Indirect costs are not chargeable to a particular attorney and include line items such as rent, marketing, and legal administration costs and compensation.

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