Final answer:
In job order costing, the valuation methods used are actual costing and normal costing. Actual costing calculates the cost of each job based on actual costs incurred, while normal costing relies on estimates and predetermined rates. The choice of valuation method depends on the business's needs.
Step-by-step explanation:
In job order costing, the valuation method used is actual costing. This method calculates the cost of each job by tracking the actual direct materials, direct labor, and overhead costs incurred for that specific job. Actual costing provides a more accurate reflection of the costs associated with each job, as it considers the unique characteristics and requirements of each job. For example, if a company is manufacturing custom-made furniture, each piece will have different materials and labor requirements, and actual costing allows for precise cost allocation.
Another valuation method used in job order costing is normal costing. This method relies on estimates and predetermined rates to allocate direct materials, direct labor, and overhead costs to jobs. It uses predetermined rates for overhead based on historical data or standards. Normal costing simplifies the costing process, but it may result in some variances between the estimated costs and the actual costs.
Both actual costing and normal costing have their advantages and disadvantages, and the choice of valuation method depends on the nature of the business and its specific needs.