Job Costing – Micro Level Cost Accounting and its Benefits
Keywords – Features of Job Costing Explained – Job Costing System
Job costing is a micro-accounting technique, focusing on the costs incurred during a job. The said costs may include costs of machinery, employees, and even any overheads.
As a result, and by doing so, companies are able to look at their costs at a small-scale and take decisive actions, e.g. billing clients for overheads not covered by a contract.
Looking at the bigger picture, cost accounting has more distinct benefits too.
Benefits and Purpose
In most organisations, there are multiple jobs running at the same time.
In traditional accounting, the breakdown of costs is viewed at the micro level, i.e. the overall costs in the property accommodation sector. However, by looking at the overall costs, a company may not realise any cost altering decisions without extended efforts.
On the other hand, through job costing, the view of the costs remains at a humanly manageable level, allowing organisations to facilitate improved decision making.
In addition, if a job is set to run for a relatively longer period, through job costing, an organisation can set a comparative measure where the overall allocated budget for the job can be analysed. Based on this information at any given moment, management can then release updated instructions to maintain the conditions in which the job will be completed.
Similarly, if a job is set to run on multiple occasions, as with most jobs within an organisation, job costing provides a direct platform to compare the costs between one instance and another, and derive the reasons for this happening. Again, this provides a pathway for the management to improve organisational matters.
As expected, the number one consideration for job costing is accuracy.
Without a careful layout of accounting information, it simply loses its meaning.
Therefore, in order to make sure that the information remains accurate, management needs to consider means of reviewing, invoicing, and controlling costs.
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And, to learn about other areas combining costs and accounting, check: