This is a form of order costing which applies in situations where work is executed strictly according to customers‟ specifications.
The production process depends upon the number of orders received from customers. As such production is not standardized and the goods manufactured are not for stock but for immediate delivery to the customer once it‟s complete in all respects.
The purpose of job costing is therefore to estimate the profit made on each job.
Features/characteristics of job costing
1. Each job is dissimilar in nature requiring special treatment hence the operations, processes and sequences may differ from job to job.
2. Production is intermitted i.e. it‟s not continuous.
3. Production is undertaken for customer‟s orders and not for stock.
4. No selling and distribution expenses are incurred since the customers ordinarily collect their goods in most cases.
5. Each job is treated as a cost unit.
6. The cost of production of every job is ascertained after completion of the job.
7. Each job is distinctively identified a production order throughout the production stage
Examples of industries that apply job costing.
1. Engineering workshop items.
2. Furniture making.
3. Machine tools making industry etc.
The following costs were incurred on job no. Y250 for the production of standard television sets against customer orders
Fixed overheads is estimated at ksh. 20,000,000 for 10,000 normal working hours.