scope:

Purpose

A. The purpose of a job order cost accounting capability is to assign and accumulate costs for each job, i.e., an order, a contract, a unit of production, or a batch. Job order costing should be used if the production or service is being performed to meet customer specifications or requirements, if different components are made for inventory, projects are undertaken to construct real property, or when job order accounting is required for a specific organizational unit. Job order costing allows more control, less estimation, and more direct and reliable allocation of costs.

B. The determination as to the need for a formal job order cost accounting capability is a management decision. The decision to establish such a capability should be based upon a recurring need for cost accounting information. This chapter discusses how to establish a job order cost accounting functionality, the type of source documents required, typical management reports produced by the capability, and possible uses of the reports. The structure for job order data must be consistent with the Standard Financial Information Structure (SFIS) and the SFIS Business Rules.