What is job order costing?

• Direct labor

• Direct resources and materials

• Manufacturing overhead, like rent, utilities, and maintenance of necessary equipment

The process of job order costing follows these standard steps:

• Identify the job

This is the step in which a number or code is given to each specific job.

• Track direct materials and resources

This step involves the tracking of all materials and resources that are related to each job, this includes items like salaries, wages, and benefits that are paid to employees who contribute to the job.

• Track manufacturing overhead

This step involves giving a predetermined overhead rate to each specific job, these are based on overhead costs for a particular time frame, and link those expenses to each job based on the actual amount of direct labor that is utilized.

• Determine the total cost

Lastly, the final step entails tallying all of the associated costs that have been tracked and allocated. By adding these costs together you get the calculation of the total cost of producing the specific product, or service.