2. explain with one example how job costing is important in any business in the service...

2. explain with one example how job costing is important in any business in the service industry.

Expert Solution

Job costing in the service industry helps in determining the profits of each individual job. It will assist in ascertaining whether it is beneficial to perform the job or not.

For example, an advertising firm received an order to produce an advertising film. The price quoted is $25,000. Firm estimated the following costs:-

Direct labor cost = $10,000

Direct material cost = $5,000

Overheads = $5,000

Estimated margin = 20% ie 20% of $20,000 = $4,000.

The total amount that normally charged by firm is $24,000.

Price offered = $25,000

Therefore, the firm will accept the order. If the price offered below $24,000, then it would have been a cause of concern.

Thus, job costing helps in determining the profitability of an order.

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ekkarill92 answered 1 year ago

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