Job Costing has been around for many years to determine the cost of manufacturing a given product. The process by which the expenses are record is costing. Job costing software should make the process of recording the transaction simpler and not more difficult and time consuming. Job costing software is not like cost accounting because it does not incur the situation of debit-credit transactions. Job costing does use the same data to determine profitability and to evaluate all the cost of manufacturing the product. Here are a few purposes which may help you determine the need for a proper job costing software package.
1. To determine the actual costs of the manufactured item.
2. To determine the total costs of all the components of a manufactured item.
3. To determine the standard price of the product
4. To determine the selling price of a the product which would include profit above the actual costs.
5. To determine feasibility of manufacturing the product at a profit
6. To evaluate the accuracy of estimates. This is after the fact and the goal is to match or better the estimate cost.
7. To determine which components should be purchased versus those to be manufactured. In the day and age of outsourcing it may be more cost effective to purchase some parts.
8. To compare the costs of manufacturing the item with different processes.
Costing is an essential component to the manufacturing processes because without it you would be waiting until the end of the month to see if you were profitable. Also, you would not know what jobs were profitable versus the losers.