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All You Need To Know About Job Costing

Published: September 13, 2016

A job costing system is an efficient way to ensure that you can create an accurate description for expenses for your organization. Material, labor and overhead cost can be calculated and summarized with the help of a job costing system before an in item is manufactured or produced. Job costing is a process of calculating the cost, whereby the cost is evaluated for a work order or a job process. It is used to find out costs in industries, which need to measure production in relation to the number of completed jobs. This industrial concept is generally applied to industries that manufacture units according to customer requirements. It provides relevant information which can be instrumental in evaluating of profitability. In addition to the descriptive productivity analysis, job costing also allows you to streamline other processes in your organization.

Some of the advantages of a job costing system are given below;


The time allocation and job costing system allows a manager to assign cost to individual jobs and operation. This can also help the organization calculate how much profit they can make with each completed job. This will in turn help the origination evaluate which tasks are more profitable than the others and that can also help employees streamline and prioritize their work schedules to give precedence to work activities that yield more profit and personal satisfaction for them than others. Although this function can be highly efficient for companies that handle customer orders directly, it can also be used by companies that need a structured and detailed statistical interpretation of their individual workplace operations.


Time allocation and job costing also enable the employer to evaluate the level of achievements and performance of each employee. This is somewhat different from process costing, although many of you might think that they are similar in most regards. Instead of providing the overview of the entire team or department as a whole, job costing enables you to interpret individual employee data in terms of cost-control, efficiency and productivity. If an employee fails to meet their objectives, you will be notified immediately. That can come in handy during performance appraisal processes.


If a company wants to access and calculate the expenses that are accrued on an individual job, it can provide you the opportunity to calculate cost per operation, items or services used and understand the need or requirement for their utility. By finding and formulating the summary of each job operation, you can use strategies to simply determine the methods to control and reduce costs for future operations.

Flexibility and Accuracy

Labor costing is an effective method to calculate indirect costs as well as overheads. Without an elite system, it can become quite difficult to calculate such costs as they consist of various variables. Having an algorithm that traces each item used in an operation and one which calculates cost automatically, it can be a relief for any manger or employer. This can save a lot of resources in terms of time and money and provide a simple and accurate solution to an otherwise complex calculation system.

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