job costing

Definition

Order-specific costing technique, used in situations where each job is different and is performed to the customer's specifications. Job costing involves keeping an account of direct costs (labor, machine time, raw materials) and indirect costs (overheads). Since both types of costs are usually closely related (a job requiring high input of labor and material is likely to consume more power, machine time, supervision time, inspection time, etc.) indirect costs may be applied as an estimated fraction of direct costs. Job costing methods are similar to contract costing and batch costing methods, and are used in construction, motion picture, and shipping industries, in fabrication, repair, and maintenance works, and in services such as auditing.