Question

Job order costing accumulates and records costs by job and assists managers in evaluating actual and expected costs related to direct materials, direct labor, and factory overhead costs.

Select a company that would employ a job order costing system. Research the company and discuss why a job order costing system is the 'correct' fit for that organization. Discuss a product the company sells and discuss what direct and indirect costs would be included on the job cost sheet.

Reply in 3 paragraph

Answer 1

The company selected and researched is Boeing Airlines. Boeing Airlines is world’s largest aerospace company and leading manufacturer of commercial jetliners and defence, space and security systems.

Boeing Airlines would use a job order costing system for its products manufactured and it is correct fit due to following reasons

· The orders are customer driven. Each customer would give specific order for number of products required

· The orders are customised since each customer would need customisation in the product to be delivered based on their requirements

· Separate job cost sheet is maintained for each job order

· The costs are accumulated at each order level

· Profit can be ascertained based on the each order

The following Direct and indirect costs would be included on the job cost sheet

Direct costs

· Direct materials – steel ,aluminium, titanium and their alloys, seats and seat covers, etc

· Direct labor – Labor deployed in manufacture of products in areas like production shop floor, assembling area, etc

Indirect costs

· Indirect materials like production consumables- oil, lubricants, cleaning materials ,etc

· Indirect labor like labor engaged in material handling and moving finished goods

· Factory depreciation on equipment, buildings, etc

· Factory repairs and maintenance

· Factory utilities like electricity, water, etc

· Factory rent, property taxes and rates

· Factory insurance