This document provides an overview of a job order cost system. It describes job order costing as a method used when production is done according to customer orders rather than for stock. Each job has a unique cost that is tracked from start to finish using a job cost sheet. The objectives are to determine the accurate cost of each job and identify profitable versus unprofitable jobs to aid future estimates. The key aspects of job order costing include distinct work orders for each job, tracking direct and overhead costs accumulated to each job, and comparing estimated versus actual costs for process improvement and pricing future jobs.

1. JOB ORDER COST SYSTEM
PRESENTED TO:
C.VIJAY KUMAR.
FACULTY OF
COMMERCE DEPT.
UNIVERSITY OF MYSORE

2. Contents:
 Introduction
 Features
of job order cost system
 Objectives of job order cost system
 Pre-requisites of job order costing
 Advantages and disadvantages
 Procedure of job order cost system
 Conclusion

3. INTRODUCTION:
Job costing is that specific order costing which applies
where the work is undertaken as an identifiable unit such as:
•Manufactures of products to customers’ specific
requirements.
•Fabrication of certain materials where row materials are
supplied by the customers.
•Repairs are done within a factory or at customers’ premises.
•Manufacturing goods are not for stock purposes but for
immediate delivery, once these are completed in all respects.
•Internal capital expenditure jobs etc.

4. FEATURES OF JOB ORDER COSTING:
•The production is generally against customers’ order but
not for stock.
•Each job has its own characteristics and needs special
treatments.
•Each job is treated as a cost unit under this method of
costing.
•Each job is distinctively indentified by a production order
throughout the production stage.
•The cost of production of every job is ascertained after
the completion of the job.
•The work-in-progress differs from period to period
according to the number of jobs in hand.

5. OBJECTIVES OF JOB ORDER COSTING:
•It helps to find out the cost of production of every job or
order and to know the profit or loss made on its execution.
•It helps the management to make more accurate
estimates for costs of similar jobs to be executed in future
on the basis of past records.
•It helps the management to control the operational
inefficiency by making a comparison of actual costs with
estimated ones.
•It helps the management to provide a valuation of workin-progress.

6. PRE-REQUISITES FOR JOB ORDER COSTING:
•A sound system of production control.
•Comprehensive works documentation, typically this
includes: work order and/ or operation tickets, bills of
materials and/or materials requisitions, jig and tool
requisitions etc.
•An appropriate time booking system using either time
sheets or piece work tickets.
•A well organized basis to the costing system with clearly
defines cost centers, good labour analysis, appropriate
overhead absorption rates and a relevant issue pricing
system.

7. ADVANTAGES OF JOB ORDER COST SYSTEM:
•It records costs more accurately and facilitates cost
control by comparing actual with estimates.
•It enables the management to ascertain which of the jobs
are more profitable than the others, which are less
profitable and which are incurring losses.
•It provides a basis for estimating the cost of similar jobs
taken up in future and thus helps in future production
planning.
•Determination of predetermined overhead rates in job
costing necessitates the application of a system of
budgetary control of overheads with all its advantages.
•It is useful in quoting cost plus contract.

8. DISADVANTAGES OF JOB ORDER COST SYSTEM:
Following are the disadvantages of the job order cost
accounting:
•It involves a great deal of clerical work in recording daily
the cost of materials issued wages expanded and
overheads chargeable to each job or work order which
adds to the cost of cost accounting. Thus it is expensive.
•The scope of committing mistakes is enough as the cost of
one job may be wrongly posted to the cost of the other job.
•Cost comparison among different jobs becomes difficult
especially when drastic changes take place.

9. •Determination of overhead rates may involve budgeting
of overhead expenses and the bases of apportionment and
absorption but unless such budgeting is complete i.e.,
extended to material, labour and expenses, its advantages
are considerably reduced.
• Job costing is historical costing which ascertains the
cost of a job or product after it has been
manufactured. It does not facilitate control of cost
unless it is used with standard or estimated costing.
PROCEDURE OF JOB ORDER COST SYSTEM:
Jobs executed during a certain time period are
bound to have different units of production. Unit cost is
determined by diving total cost by the number of units or a
volume of goods produced there under. The procedure for job
order cost system may be summarized as follows:

10. PROCEDURES:
•Receiving an enquiry.
•Estimation of the price of the job.
•Receiving an order.
•Production order.
•Recording of costs.
•Completion of job.
•Profit or loss on job.
• RECORDING OF COSTS:
Job Cost Sheet/Card is maintained for each job. This is a
document which is used to record direct material, direct
labour and overheads applicable to respective jobs.

11. JOB COST SHEET / CARD
Customer name: ……………………………………. Job no.
And address: …………………………………………. Date started:
Description: ………………………………………….. Date promised:
Quantity: ………………………………………………. Date finished:
Special remakes if any: ……………………………………………………………
Dept
Materials
Qty
1
2
3
Cost Summary
Departments
1
2
3
Job Order Price
Profit (Loss)
Rate
Labour
Amt
Materials
H Rate
rs
Labour
Overheads
Amt
Overheads
Hrs
Rate
Total Actual Estimate
Amt

12. Discrepancies between actual and estimated costs are
explained below:
•………………………………………………………………..
•………………………………………………………………..
•………………………………………………………………..
CONCLUSION:

13. REFERENCE: