Job Order System

What is a Job Order System?

A business needs to allocate its job costs to products it produces and manufactures. Costs can either be allocated by customer orders or by manufacturing process.

If the costs are allocated by customer order, the cost of each job will differ and a job order system is used to keep track of the costs associated with each job.

Typically professional firms such as accountants and lawyers will use a job order system to manage and record costs to a particular client. In job order costing, each job and job cost is different.

The alternative, process costing, is more often used by assembly line manufacturers where each product is identical and the costs of each product is the same.

In process costing the total cost is divided by the number of units produced to give an average cost per unit. No record is kept of the costs associated with each individual unit.

For further information on a job order cost accounting system see the Wikipedia definition.

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Last modified March 23rd, 2016 by Team

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