Limitations of job costing

Limitations of job costing

1)      Job costing is comparatively more expensive as more clerical work is involved in identifying each element of cost with specific departments and jobs.

2)      With the increase in the clerical processes, chances of errors are enhanced.

3)      The cost as ascertained, even where they are complied very promptly, are historical as they are compiled after incidence.

4)      The cost compiled under job costing system represents the cost incurred under actual conditions of operation. The system does not have any scientific basis to indicate what the cost should be or should have been, unless standards of performance efficiency are established. Estimated cost, prepared by some concerns in respect of job orders, also do not serve the purpose.

5)      If major economic changes take place, comparison of cost of a job for one period with that of another becomes meaningless. Distortion of cost also occurs when the batch quantities are different.