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.

Answer 1

Job order costing is the method of costing where cost is computed for each job and suitable for companies that produce variety of products

Custom tailoring companies may use job order costing

In the case of custom tailoring companies, they receive customized order according the needs of customer and each order placed by customer's is a job. So,The cost will be allocated to each job and job order costing method will be suitable for this organization

Suppose, Company sells customized shirt to a customer

Direct cost:

• Direct material cost such as fabric, buttons and threads
• Direct labor cost on the basis of labor hours
• Direct expense such as shirt designing charges paid to designer

Indirect cost:

• Indirect material cost such as lubricating oil for tailoring machine
• Indirect labor cost such as supervisor salary
• Indirect expense such as depreciation of tailoring machine, repairing expenses of tailoring machine