1. It helps to distinguish profitable jobs from unprofitable jobs 2. It helps to identify defective work and spoilage with a department or person 3. Selling price of special orders can easily be fixed. 4. It helps to prepare estimates of cost for submitting quotations and tender for similar jobs 5. It helps to control future cost. Requisites of Job casting system: 1. A sound system of production control 2. An effective time booking system 3. Clearly defined cost centre 4. Appropriate overhead absorption rate, and 5. Proper material issue pricing method. Procedure for Job order costing system: The Procedure for job order costing system may be summarized as follows:- 1. Receiving an enquiry from the customer regarding price, quality etc 2. Make an estimation of the price of the job after considering the cost incurred for the execution of similar job in the previous year 3. Receiving an order, if the customer is satisfied with the quotation price and other terms of execution. 4. If the job is accepted, a production order is made by the Planning department 5. The costs are collected and recorded for each job under separate production order Number, and a Job Cost Sheet is maintained for that purpose. 6. On completion of job, a completion report is sent to costing department. Illustration 1 From the following particulars calculate the cost of Job No.505 and price for the job to give a profit of 25% on the selling price. Material Rs. 6820 Wage details: Department X 60 hrs @ Rs. 3 per hr Y 50 hrs @ Rs. 3 per hr z 30 hrs @ Rs. 5 per hr The variable Overheads are as follows: Department X Rs. 5000 for 5000 hrs Y Rs. 4000 for 2000 hrs z Rs. 2000 for 500 hrs 550 The total fixed expenses amounted to Rs. 20,000 for 10,000 working hours. Calculate the cost of Job No. 505 and price for the job to give a profit of 25% on selling price