Final answer:
Job order costing is a system used by companies producing customized products or services to track costs. Examples include shipbuilders, construction firms, and custom furniture manufacturers, all of which need to control costs on a per-job basis.
Step-by-step explanation:
Job order costing is a cost accounting system used by companies that provide customized products or services. Under job order costing, the costs of direct materials, direct labor, and manufacturing overhead are accumulated separately for each job, allowing businesses to assess and control the cost of each individual job accurately. This method is commonly used by manufacturing firms that produce goods in batches based on specific customer orders, but it is also used in industries like construction, printing, and specialized services where each customer order is unique.
Examples of companies that use job order costing are shipbuilders, construction firms, and custom furniture manufacturers. For instance, a shipbuilder who designs ships according to specific customer requirements must track costs accurately to ensure that it remains profitable. In the domain of construction, companies such as Bechtel and Fluor Corporation utilize job order costing to estimate and track the costs of their projects, which vary in size, complexity, and duration. Custom furniture companies like Ethan Allen also apply job order costing to determine the cost of producing individual pieces of furniture made to order.
Through job order costing, these companies can give detailed quotes to customers before a job begins, monitor costs as the job progresses, and ensure profitability on a per-job basis. This level of detail helps companies in their decision-making process and is integral to their financial success.