Job order costing:-

Job order costing is a costing method which is used to determine the cost of
manufacturing each product. This costing method is usually adopted when the
manufacturer produces a variety of products which are different from one another
and needs to calculate the cost for doing an individual job.

In a job order costing system, costs are traced and allocation to job and then the costs
of the job are divided by the numbers of units in the job to arrive at an average cost
per unit. This average cost per unit is also referred to as the unit product cost.

Job costing includes the direct labor, direct materials, and manufacturing overhead
for that particular job.

Measuring Direct Materials cost:-

Material cost
The material cost is the cost incurred for purchasing materials that are essential for
the manufacturing process. These costs are classified as direct or indirect costs based
on their traceability to the product. 

Direct costs 

if the raw material used to manufacture the product is one of the essentials and is
directly used in the product. For example, wood pulp is a direct cost for paper
manufacturing, because it is the primary raw material used in the process.

Indirect costs

are any materials that are needed to supplement the production process. For
example, the oil and coolant used in the paper-making machinery to keep it
running and cooled during the production process would be an indirect cost.

A bill of Materials

Is a document that lists the quantity of each types of direct material needed to
complete a unit of product.

Materials requisition form

Is a document that specifies the type and quantity of materials to be drawn from the
storeroom and identifies the job that will be charged for the costs of the materials.

When an Agreement has been reached with customer concerning the quantities,
prices, and shipment date for the order, a production order is issued. Then the
production Department prepares a Materials requisition form.

Measuring Direct Labor cost:-

Direct labor
Direct labor is the cost of the employees who are directly involved in
the product’s production process. It includes their wages and any other benefits they
are offered while working on the product.
For example, the person who collects wood pulp and sends it for processing into
paper, and the person who monitors the whole production process from start to
finish are both considered direct labor. 

Whereas the guards or the janitors who are employed to supervise and assist during
the production process are indirect laborers and are not included as a part of direct
labor.