Week 2: Job-Order Costing Systems
What is Job-Order Costing, and how is it similar and different from Process Costing?
Additional Questions for Week #2:
Basic Understanding & Application:
- What is a job order costing system, and what types of businesses would typically benefit from using this system?
- Explain the key documents used in a job order costing system (e.g., job cost sheet, materials requisition form, time ticket). How do these documents contribute to tracking costs?
- How are manufacturing overhead costs estimated and applied in a job order costing system? What happens if the applied overhead differs from the actual overhead incurred?
- Describe the flow of costs through a job order costing system, from the initial purchase of raw materials to the completion of a finished good.
Analysis & Decision-Making:
- How can a job order costing system help businesses determine the profitability of individual jobs or projects?
- What are some ways that businesses can use job order costing information to improve pricing decisions and bidding on future jobs?
- How can a job order costing system help identify areas where a business might be able to reduce costs or improve efficiency?
Comparison & Challenges:
- What are the main differences between a job order costing system and a process costing system? Provide examples of industries where each system would be appropriate.
- What are some of the challenges associated with implementing and maintaining an accurate job order costing system?
- How can technology be used to improve the efficiency and accuracy of a job order costing system?
Specific Scenarios:
- If a company underestimates its manufacturing overhead costs, how might this affect its financial statements and decision-making?
- In a service-based business that uses job order costing (e.g., law firm, advertising agency), what are some examples of direct and indirect costs that would be tracked?