What is 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. Job costing includes the direct labor, direct materials,

and manufacturing overhead for that particular job.

Importance of job order costing

To determine the profitability of the job

Job order costing is useful for determining if a job is profitable. It helps

the company make estimates about the value of materials, labor, and

overhead that will be spent while doing that particular job. Efficient job

order costing helps companies to create quotes that are low enough to

be competitive but still profitable for the company.