 In this discussion, we will discuss the discussion question of Discuss how a job cost system may be used in either a manufacturing company or a service company If we see a discussion question like this or essay question like this and we don't know exactly where to start We may first want to think, okay, we're talking about a job cost system What is a job cost system? When might we use a job cost system? And then that might jog our memory as to when we might use it in manufacturing or service type of company So a job cost system is typically going to be something that we're going to be using We usually think of it as one of the two options of a manufacturing company So the first thing that comes to your mind may be that a job cost system typically relates to a manufacturing company Now that's not always the case, we could apply it to the service company in certain areas as well But that might be where you want to start We could say, okay, I know the job cost system is one of two systems that we typically use In basically a manufacturing type company, a job cost system or a process cost system We know that a job cost system is typically going to be used when the things that we are producing are different in nature Oftentimes customized in nature So if we're producing something that's going to be customized in nature We're typically going to be using a job cost system as opposed to If we're producing something that's going to be the same in nature Everything they produce is going to be the same type of units that we make In which case we would use a process cost Support accounting instruction by clicking the link below Giving you a free month membership to all of the content on our website Broken out by category, further broken out by course Each course then organized in a logical, reasonable fashion Making it much more easy to find what you need than can be done on a YouTube page We also include added resources such as Excel practice problems, PDF files, and more Like QuickBooks backup files when applicable So once again, click the link below for a free month membership to our website And all the content on it, boss system So that might and once we think in that terms Then we might say okay well it is possible then to have a service company as well That could use a similar type of system Now how would they do this? Why would they be the same if they're not producing anything? Well the service company is usually going to be having one component of the process here Meaning when we make things We typically have the direct labor, the materials, direct materials, and the overhead A service company you can think of if we have customized service Services? Oh services So if we do custom jobs for people often like a law firm or a bookkeeping firm Then we don't really have the materials of course We don't have to worry about that but we do have to track our time I lost track of time And specific so the direct labor is there So we have the same kind of issue it's just a little bit more simplified in that we don't have the materials Which is why most book problems focus on manufacturing inventory So we have to deal with that material component But if we're a bookkeeper firm or a law firm We're going to have to apply our time typically to the jobs And that will help us to track our costs by job And it's often typically something that we're going to use as a basis for which we will make the invoices on So therefore we're going to track the costs in a similar way And we may do a similar process in terms of tracking the overhead So either system we use if we use a manufacturing system We're going to have to track the materials that we purchase That's then going to go to the working process The working process will be then supported by job cost sheets And then we'll move the working process to the finished goods once they're completed Which will also be supported by job cost sheets And finally we will sell those jobs at the end On the direct labor side That of course will only apply if we're making things inventory But the direct labor will be similar between a service company or a manufacturing company We're going to have labor that's going to go into the job For a manufacturing company we'll apply the direct labor to the working process account to the inventory we're making And we'll support that, we'll back it up by the job cost sheets For a service company we'll do a similar thing We're going to apply the work to the working process And support it by a job We'll apply the same type of process and break out the jobs that we are working on With relation to the direct labor that we have And then the overhead is going to be the same process We're going to put everything that's overhead into a bucket For a job cost list for a company that makes stuff That could include things like indirect materials But also indirect labor and any other stuff that we use in order to make the inventory For a service company of course we don't have indirect materials necessarily Unless it's like supplies or something like that But we do have all the other stuff that could be involved That we want to basically apply as part of overhead That we're going to use to basically create our costs And allocate our costs out by job