Chapter 2, Problem 1Q

What is job-order costing?

To determine

Job order costing system: Job order costing is used where each job is different in terms of specifications required by the customer. Job order costing involves both direct and indirect costing.

Definition of job order costing.

Answer to Problem 1Q

Solution:

Job Order Costing

In order to track each and every expense while producing a product or a batch, job order cost accounting is done. For this accounting process, they use material and labor and overhead cost flow documents and job cost sheets to track the expenses involved during the production process. Allocating manufacturing cost to the product in batches or a single product is called job- order costing.

Explanation of Solution

For instance, a customer gives an order to the printing company to print 500 T-shirts. The printing company will charge a price to the customer and print the T- shirts in a specific color. Now, the printing company needs to track the expense incurred during the production of the T-shirts. It is done using the job order costing system.

Conclusion

Thus, the job order costing is well-defined.