Importance Of Job Order Costing System

A job order cost system is one in which accumulates cost by individual products. Furthermore, a job-order costing system is utilized for assigning manufacturing costs to an individual product or batches of products. Generally, the job-order costing system is used only when the products manufactured are adequately different from each other. In contrast, when products are identical or nearly identical, the process-costing system will likely be used (Averkamp, 2016).

In addition, a job-order costing system is generally used by companies that manufacture a number of contrasting products. Therefore, job-order costing system is a widely used costing system in manufacturing as well as service operations. Moreover, when companies employ and accept

An example of a situation in which you would use job order cost information is in an industry such as a building construction industry since each building is unique. The manufacturers of custom equipment or custom cabinetry are also examples of companies that will keep track of production costs by item or job (Averkamp,

Of greater importance, job-order costing system needs to accumulate three types of information which include direct materials, direct labor, and overhead. These factors are highly important essentially because of the significant variations in the products produced. Hence, each product or batch has a job identification number and costs are accumulated by a job number. All the more, job-order costing systems requires detailed accounting information and thus the total cost of all jobs is accumulated in one work-in process inventory control account; details of the cost materials, labor, and overhead for each job are kept in subsidiary records called job-order cost sheets (Edmonds, Tsay, & Olds,