Question

1. Explain what is job order costing.

2. List 3 companies that could use job order costing and identify a type of product that they produce that will follow job orders. Ex: CPA firm, a job order would be the auditing service of 1 client.  

Answer 1

1. ‘Job order costing’ or ‘specific order costing’ means ascertaining costs of each job, work order or project separately. This method is also called as ‘production order costing’ or ‘terminal order costing’. It is adopted by many undertakings, which manufacture products against specific orders. Adoptation of Job Costing. Both manufacturing and non-manufacturing concerns follow this method. Manufacturing concerns adopting this method are printing press, machine tool manufacturing, Interior decoration, etc. Non-manufacturing units such as general engineering works, auto-repair shop, etc..

2.Examples of service businesses that use job order costing system include movie producers, accounting firms, law firms, hospitals etc.Examples of companies that use job costing systems include Boeing (airplanes), Lockheed Martin (advanced technology systems), and Deloitte & Touche (accounting).