Job costing can be defined as a kind of precise order costing where work is undertaken as an individual unit and manufactured according to customer’s specific requirement. It is perfect when the products to be produced are dissimilar and non- repetitive in nature like that in case of ship building, printing, advertising etc…

The main advantages of job costing are as follows:-

1. It provides detailed analysis of costs which enable the management to determine the operating efficiency of the different factors of production.

2. It helps in comparing the two set of works and hence it is of great use while deciding on the efficiency of the department’s within an organization.

3. Since precise order is to be completed by the company can allocate the resource according to order and hence there is no chances of any spoilage and hence it saves lot of money for the company.

4. Company can know precisely how much profit it made from the completion of the order immediately after completing it.

5. It lays down the standard for future similar contacts so that company can follow those standards and complete the next similar jobs effectively and efficiently.

Well there are certain disadvantages also associated with job costing like it is more costly as compared to other costing methods because it has to be done individually rather than collectively and it should be used with standard costing if company wants to manage the costs effectively. Hence it has to be used according to specific requirements and only when company can derive significant profits from it.

Related posts:

1. Techniques of Costing
2. Marginal Costing and Its Importance to the Management
3. Differences Between Job Costing and Process Costing