Show In other words, the former is used to calculate the cost of jobs or contracts which are distinct in nature, while the latter used to compute the cost charged to each process. So, here in this article excerpt, we present all the differences between Job Costing and Process Costing, in a tabular form. Content: Job Costing Vs Process Costing
Comparison Chart
Definition of Job CostingA method of costing in which cost of each ‘job’ is determined is known as Job Costing. Here job refers to a specific work or assignment or a contract where the work is performed according to the customer’s instructions and requirements. The output of each job consists of normally one or less of units. In this method, each job is considered as a distinct entity, for which cost is ascertained. Job Costing is applied when:
Job Costing is best suited for the industries where specialized products are manufactured as per customer needs and demands. Some examples of those industries are Furniture, Ship Building, Printing Press, Interior Decoration, etc. Definition of Process CostingA costing technique, which is used to calculate the cost of each process is known as Process Costing. Here process refers to a separate stage where production is performed to convert the raw material into an another identifiable form. Process Costing is used in the industry where identical products are produced in huge quantities. In Process costing, the plant is divided into some processes where the production is performed either sequentially, parallelly or selectively. The output of the former process becomes the input of the latter process, and at the end, the output of the last process is the final product. The individual process account is prepared for each process. Process Costing is best suited for large-scale production is done as well as where there are multiple levels of producing a product. Some example of such industries is steel, soap, paper, cold drink, paints, etc.
The following are the major differences between job costing and process costing:
ConclusionThere is no comparison between Job Costing and Process Costing because both the methods are used in different industries. Although, the differences exist in the two methods. One such difference is, each job requires a high degree of supervision and control, but the process does not require so, as they are standardized in nature.
June 10, 2022 June 10, 2022/ Job costing involves the detailed accumulation of production costs attributable to specific units or groups of units. For example, the construction of a custom-designed piece of furniture would be accounted for with a job costing system. The costs of all labor worked on that specific item of furniture would be recorded on a time sheet and then compiled on a cost sheet for that job. Similarly, any wood or other parts used in the construction of the furniture would be charged to the production job linked to that piece of furniture. This information may then be used to bill the customer for work performed and materials used, or to track the extent of the company's profits on the production job associated with that specific item of furniture. Process costing involves the accumulation of costs for lengthy production runs involving products that are indistinguishable from each other. For example, the production of 100,000 gallons of gasoline would require that all oil used in the process, as well as all labor in the refinery facility be accumulated into a cost account, and then divided by the number of units produced to arrive at the cost per unit. Costs are likely to be accumulated at the department level, and no lower within the organization. Job costing and process costing can be used in both manual and computerized accounting environments. Given these descriptions of job costing and process costing, we can arrive at the following differences between the two costing methodologies: Uniqueness of ProductJob costing is used for unique products, and process costing is used for standardized products. Size of JobJob costing is used for very small production runs, and process costing is used for large production runs. Record KeepingMuch more record keeping is required for job costing, since time and materials must be charged to specific jobs. Process costing aggregates costs, and so requires less record keeping. Customer BillingJob costing is more likely to be used for billings to customers, since it details the exact costs consumed by projects commissioned by customers. Hybrid SystemsIn situations where a company has a mixed production system that produces in large quantities but then customizes the finished product prior to shipment, it is possible to use elements of both the job costing and process costing systems, which is known as a hybrid system. June 10, 2022/ |