What Is Job Order Costing?

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Job-order costing is an accounting method that determines the cost of material, labor and manufacturing overhead used to create a product. This technique is employed by businesses that produce different kinds of goods or services within a specified time frame.

Industries that commonly use job-order costing offer customized products and services that include special order printing, construction, hospitals, shipbuilding and professional services such as law firms and movie studios. This accounting system provides important information to managers to help them plan, forecast, monitor, control day-to-day activities and evaluate business performance. It allows decision-makers to keep track of expenses incurred on a job against the revenue produced by that job.