Question

what are the major components of a job costing system? how do they interconnect?

Answer 1

In a job costing system the costs are accumulated for a specific job and the system enables tracking specific costs to individual jobs.

The main cost components of a job costing system are:

• Direct material – Job costing accumulates the cost of materials and then assigns these costs to a product or a job once the materials are used.
• Direct labor – In this case labor costs are assigned to specific jobs. Employees charge their time to specific jobs and the labor costs are then assigned accordingly.
• Factory overhead – The overhead costs are accumulated into cost pools and then the costs are allocated to specific jobs.

The cost components interconnect on the basis of accounting principles. Each of these components is used in case of a specific job and direct materials and direct labor are direct costs while factory overhead is an indirect cost. The different cost components are accumulated in a bucket for a particular job.