Disadvantages of Job Order Costing System
There are also several Disadvantages of Job Order Costing System with job order costing system. One is that it focuses attention primarily on products rather than on departments or activities. This is not an issue if there are supplemental systems in place that record information about these other cost categories, but it leaves management with inadequate information if this is not the case. An other difficulty is that overhead is generally allocated based on rates that are changed only about once a year. Considerable fluctuation in overhead costs over the course of a year can result both in over and under allocation of overhead costs to jobs during that period. Another Disadvantages of Job Order Costing System is specific to the use of normal costing. This practice involves the use of standards overhead rate rather than one that is based on actual costs and requires adjustment from time to time.