Cost Accounting For Dummies, 2nd Edition

Chapter 4

Estimating Costs with Job Costing

IN THIS CHAPTER

Deciding when to use job costing and process costing

Identifying cost objects

Using job costs to price a product or service

Learning to use a normal costing system

Applying indirect cost to the budgeting process

Job costing is a costing methodology you use when your customers incur unique amounts of costs. Job costing assesses costs by the job and allows you to provide detailed price estimates based on the product constructed or service provided.

By contrast, process costing (the topic of Chapter 16) assumes that individual product costs are nearly the same for every customer. For example, if you manufacture office chairs, each chair of a particular model has the same costs. You use the same amount of metal and material, and assemble the chair using the same amount of labor. If you calculate the cost for one chair, you know the cost for every chair of that model. In other words, the customer does not have the option to create ...