Job order costing is an expense management technique in which a company
only develops products to meet customer orders, the process of flowing
costs and income for a specific job. Each job order cost sheet is filled out by
employees, and costs are often divided into three groups: direct materials,
direct labor, and manufacturing overhead. Many companies use job order
costing, such as manufacturing, construction, medical services, and retail
companies. Business order costing may be used by companies in a variety of
sectors, and it can be applied to a variety of product and service offerings.
This method is useful for tracking and comparing business expenses to see if
future tasks might be more cost-effective.
There are two examples of companies that commonly use job order
Custom Furniture Manufacturers: Companies that produce custom furniture
pieces, such as tables, chairs, and cabinets, often use job order costing. Each
piece of furniture is unique and requires different materials, labor, and
overhead costs, making it necessary to track costs on a per-order basis.
Construction Companies: Construction companies undertaking projects such
as building homes, office buildings, or infrastructure projects use job order
costing. Each construction project is unique and involves various materials,
labor, subcontracting, and other expenses, which are tracked separately for
Process costing is a cumulative cost when many conformations and modules
are created or even produced. Types of Companies That Use Process Costing
Project pricing is a popular method in the construction industry because
expenses fluctuate greatly from project to project. Companies that use the
costing process are Chevron, which is Petroleum Materials. Construction
projects need a wide range of resources, including employees and a variety
of materials and equipment. Calculating the exact cost of each input for a
particular activity can be difficult. Construction management cost strategies
need on-the-job staff and accurate data.
Two examples of companies that use process costing are:
Food Manufacturers: Companies that produce items such as beverages,
packaged snacks, or canned goods often use process costing. The production
process involves a series of continuous steps where components are
combined, processed, and packaged.
Chemical Manufacturers: Companies that produce chemicals, such as
fertilizers, paints, or industrial chemicals, often use process costing.
Production involves a series of chemical reactions and transformations
where inputs and outputs are measured in large quantities or volumes.
Heisinger & Hoyle (2012) identified key similarities: