Page 200 - DCOM202_COST_ACCOUNTING_I

Cost Accounting – I

Notes Kohler in his ‘Dictionary for Accounts’ defines job costing as “a method of cost accounting
whereby cost is compiled for a specific quantity of product, equipment, repair on other service
that moves through the production process as a continuously identifiable unit, applicable
material, direct labour, direct expense and usually a calculated portion of the overhead being
charged to a job order”.
From the above definition, it is clear that job costing is a method of costing under which the cost
of each job is ascertained separately. It is that form of specific order costing which applies where
work is undertaken to customer’s special requirements.

Did u know? Job costing is usually adopted by the concerns where a specific job is done for
a stipulated price.

Features of Job Costing

(i) The production is generally against customer’s order and not for stocks,
(ii) Under job costing method, production is intermittent and not continuous,
(iii) Each job has its own characteristics and needs special treatment,

(iv) Each job is treated as a cost unit under this method of costing,
(v) The work-in-progress differs from period to period according to the number of jobs is
hand,

(vi) There is no uniformity in the flow of production from department to department,
(vii) The emphasis is on the between division the direct and indirect expenses is laid upon,
(viii) Job costing is adopted by manufacturing organizations as well as non-manufacturing
organizations,

(ix) Under this method, the profit and loss can be ascertained in respect of each job, and
(x) Each job is distinctively identified by a production order throughout the production
stage.

Objectives of Job Costing

(i) The important objective of job costing is to ascertain the cost as well as the profit or loss for
each job,
(ii) It provides a basis for determining the cost of similar jobs undertaken in future. It thus
helps in future production planning,
(iii) Job costing is to find out hose jobs which are more profitable and those which are not
profitable or less profitable, and
(iv) It helps the management in controlling costs by comparing the actual costs with the
budgeted costs.

Advantages and disadvantages of Job Costing

The various advantages of job costing are as follows:
(i) Job costing is useful in quoting cost plus contract,
(ii) Job costing facilitates identification and control of spoilages and defectives,

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