When job order costing is used in the service industry, the allocation of indirect costs is normally based on direct labor hours.

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In job order costing, indirect costs in the service industry are typically allocated based on direct labor hours. This method assumes that the amount of indirect costs incurred is related to the amount of time spent on the job, and that direct labor hours are a reasonable measure of the amount of time spent. However, there may be other factors that affect the amount of indirect costs incurred, such as the complexity of the job or the type of equipment used, and these factors may also need to be taken into account when allocating indirect costs.

When Job Order Costing Is Used in the Service Industry