Job Order Costing in Service Companies:
Job order costing is also used in service
organizations such as law firms, movie studios, hospitals, and repair
shops, as well as manufacturing companies. In a law firm, for example, each
client represents a "job," and the costs of that job are accumulated day by
day on a
job cost sheet as the client's case is handled by the firm. Legal forms
and similar inputs represent the
direct materials for the job; the time expended by attorneys represents
the
direct labor; and the costs secretaries, clerks, rent, depreciation, and
so forth, represent the overhead.
In a movie studio, each film produced is a
"job," and costs for
direct materials (customs, props, film, etc.) and
direct labor (actors, directors and extras) are accounted for and
charged to each film's
job cost sheet. A share of the studio's overhead costs, such as
utilities, depreciation of equipment, wages of maintenance workers, and so
forth, is also charged to each film. However, the method used by some
studios to distribute overhead costs among movies are controversial and
sometimes result in lawsuits.
In sum, the reader should be aware that
Job order costing is a versatile and widely used costing method, and may
be encountered in virtually any
organization that provides diverse products or services.
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