Job Order Cost Accounting

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Job order cost accounting is used when it is fairly easy to track costs to a specific job. 

A factory that makes very small parts for many customers would not use this system.

This particular way of tracking costs is used for: 

• Large manufacturing jobs such as airplanes or special machinery
  
  
• Building trades
  
  
• Auto repair
  
  
• Legal work by an Attorney
  
  

Costs are usually recorded and collected on a job cost sheet.  These costs would include: 

• Direct Labor
  
• Indirect Labor
  
• Materials used
  
• Burden 
  
  

Any costs that can be directly applied to the job should be. 

Direct labor and indirect labor should record time worked on the job. 

Materials should be accounted for with a materials requisition form that notes the job it is for.  This form is used to fill out the materials cost on the job cost sheet.

Burden allocation is always the hardest cost to explain.  The business should have a fair and defendable method of charging these costs to jobs.

Other Cost Accounting Types:

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