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Advantages and disadvantages of Job Costing

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2.7 Advantages and disadvantages of Job Costing
2.7.1 Advantages of Job Costing
1) Costs of jobs can be calculated in advance and this helps in quoting prices.
2) Different costs such as material, labour and overheads can be analyzed and
charged to the appropriate jobs.
3) The profitability can be analyzed.
4) The actual costs can be compared with the estimated costs to exercise cost
control.
5) Wastage, spoilage etc. of materials can be found out and their causes can be
minimized.
6) The more profitable and less profitable jobs can be segregated.

2.7.2 Disadvantages of Job Costing

1) It necessitates a large volume of clerical work.
2) Cost comparison becomes difficult in case of dissimilar jobs.
3) Determination of overhead rates becomes difficult.
4) Job costing is also a historical method unless it is used with either Standard
Costing or Estimation Costing.
5) The same overhead rates may not be applicable to different jobs.

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