Job Order Costing
A costing method for tracking production costs by specific jobs or batches, used when products are manufactured to customer specifications rather than mass-produced.
Job Order Costing
A cost accounting system that tracks and accumulates costs by individual jobs, batches, or customer orders, typically used in environments where products or services are customized rather than standardized.
For example, a custom furniture manufacturer might use job order costing to track the materials, labor, and overhead costs for each unique dining table ordered by customers, assigning costs to specific job numbers rather than to production departments.
Job order costing involves creating job cost sheets for each order, recording direct materials through materials requisition forms, capturing direct labor through time tickets, and applying overhead using predetermined rates. This system provides detailed cost information for pricing, profitability analysis, and customer billing, particularly valuable in industries like construction, printing, professional services, and custom manufacturing where each job has different resource requirements.