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 appropriate when the items are not mass produced and have specifications. A luxury clothing brand like " Chanel" will deploy job order costing system to record its costs as no two items of clothing are the same and there are a lot of variations in all outfits which require figuring out the cost for every job.

Chanel also receives alot of custom made orders from celebrities and business people. These custom made pieces are specific jobs and requires job order costing.

A product in point will be a custom made gown designed for a big awards function. In that case, the direct costs would be the price of the fabric, the labor hours involved, the transportation costs. The indirect costs will be the costs allocated such as factory rent, salary of common staff, the utilities expenses etc.