Job Costing Systems

by Dan

Job order costing is a more detailed and specific form of costing, recording the individualized and actual labor, materials and overhead costs for specific jobs and products.  This allows a company to assign cost and overhead to each process at a pre-determined rate.  While more complex in nature, job order costing can also be a very accurate form of accounting.

The job order costing system can be advantageous to a management team in a handful of ways.  One of the most primary benefits is that when applied, job order costing can provide the entire management team with access to the costs incurred for each job being completed.  With this knowledge a company can streamline, calculate and assign costs and overhead individually to assure each working part of the company is reaching its optimum profitability.  These detailed specifics will give the management team the organization and knowledge to find where costs can be managed and controlled better, which can result in proper decision-making and cost-efficiency.

Another way job order costing can benefit a company is in its ability to generate individual performance assessments.  Unlike process costing which will look at a workgroup or department at large, job order costing can create more individualized data to address the efficiency, productivity and cost-control of individual employees.  This will give the knowledge needed to solve employee-based issues and target those who are failing to meet expectations.

Unlike other costing techniques, job order costing can track ongoing results for each job.  Rather than waiting until a job is completed, the accounting staff can watch a job closely throughout the process to assure there are no malfunctions along the way.  This is especially helpful when working on longer jobs, giving the staff enough time to make changes before they close and assure that realistic expectations are measured and met along the course of the job.

Job order costing also offers great flexibility, helping a company calculate particular indirect costs while simultaneously being incredibly accurate, directing specific costs into their appropriate accounts.  This dichotomy of flexibility and accuracy is a beneficial way a company can find what is or is not functioning correctly in their sphere in a continuously monitoring medium.  Regardless of the size of business or complexity/simplicity of accounts, the highly scalable solution can fit and address the needs accurately.

Leave a Comment

Previous post:

Next post: