Job Order Costing

1. Job order costing, sometimes called job costing, is a cost accounting technique that involves the simple accumulation of all costs associated with a job, order, project, or activity. Job order costing is most effective for customized activities with easily traceable costs. Direct material and direct labor are traced to the individual jobs. Manufacturing overhead is applied to the individual jobs based on an overhead rate normally calculated at the beginning of the year based on the budgeted overhead costs divided by the estimated costs driver (such as the estimated number of units to be produced). See also process costing and cost driver. A method of cost accounting that accumulates costs for individual jobs or lots.