Accounting All-in-One For Dummies, with Online Practice, 2nd Edition

Chapter 1

Estimating Costs with Job Costing

IN THIS CHAPTER

Going over how job costing works

Identifying cost objects

Using job costs to price a product or service

Reviewing the flow of costs through a manufacturing system

Job costing is a methodology you use when the costs to manufacture a product or provide a service vary according to each customer’s unique needs. Job costing allows you to provide detailed price estimates based on the product or service provided. A roofing business, for example, uses job costing, because the cost varies according to the customer’s needs. The amount of material depends on the type of roof and the square footage. Labor time varies, depending on the roof’s size, pitch, and unique angles.

A cost object is the product, activity, or process that causes your company to incur costs. In this chapter, you see how to assign costs to the cost object. You also find out how to follow the flow of manufacturing costs as a product moves through the production process.

Understanding How Job Costing Works

For some businesses, nearly every customer job has different ...