Job-Order Costing

Job Order Costing

How does it work?

• Costs are assigned to specific jobs or batches of goods based when they are incurred.
• Direct materials and direct labour are traced to the jobs because these costs are accurately measurable.
• Manufacturing overhead is estimated using a predetermined overhead rate because it cannot be accurately measured.

Who uses Job-Order Costing?

• Businesses that produce unique, custom, heterogeneous products.
• Typically, low volume (not mass produced)
• Examples:
• Home builders
• Copy shops
• Lawyers