Question

Name two educational products that would benefit from job order costing, and explain how they would benefit

Answer 1

Meaning of Job Order Costing

It is a system of costing wherein manufacturing and other related costs are assigned to individual jobs that the company received. Typically used where products are varied and customized according to customer specifications. Examples where job order costing is prominently used is Printing, accounting firms, etc.

Usage of Job Order costing in Educational Products company

Suppose a company is in to manufacturing of notebooks and color pencils. The manufacturing process for both these products vary and accordingly the costs incurred differ.

While deciding the selling price of each product, it would be better to allocate specific costs to specific product.

Also where there is an order for customized versions of notebooks or color pencils, such job should be treated as an altogether different product, costing of which should also be different.

The benefits of job order costing include determination of exact costs so according to which margins could be decided.

Since costing structure of both these products varies significantly, combined costing approach could yield misleading results