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Difference Between Job Costing and Process Costing

Job costing and process costing differ in several key ways: (1) Job costing applies to custom orders where costs are collected and tracked for each individual job, while process costing applies to mass production of standardized goods where costs are collected by department or process. (2) In job costing, losses are generally not segregated and each job is independent, while in process costing normal and abnormal losses are separated and products move together through processes. (3) Process costing lends itself better to standard costing since production is standardized, while job costing involves unique products and does not use standard costing as much.

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1K views2 pages

Difference Between Job Costing and Process Costing

Job costing and process costing differ in several key ways: (1) Job costing applies to custom orders where costs are collected and tracked for each individual job, while process costing applies to mass production of standardized goods where costs are collected by department or process. (2) In job costing, losses are generally not segregated and each job is independent, while in process costing normal and abnormal losses are separated and products move together through processes. (3) Process costing lends itself better to standard costing since production is standardized, while job costing involves unique products and does not use standard costing as much.

Uploaded by

Jayceelyn Olavario
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Difference between Job Costing and Process Costing:

Job Costing Process Costing


The form of specific order costing That form of costing which applies where
which applies where the work is standardised goods are produced and
(i)
undertaken to customer’s special production is in continuous flow, the products
requirements. being homogeneous.
Costs are collected by process or department
The job is the cost unit and costs are
(ii) on time basis and divided by output for a
collected for each job.
period to get an average cost per unit.
Normal losses are carefully predetermined and
(iii) Losses are generally not segregated.
abnormal losses are segregated.
Overheads are allocated and Units pass through the same processes.
apportioned to cost centres then Overheades are apportioned to processes on
(iv)
absorbed by jobs, in proportion to some suitable basis, some times, pre-
the time taken. detarmined rates may be used
Joint products / By-products do not Joint products/By-products do arise and joint
(v)
usually arise in jobbing work. cost apportionment is necessary.
The standardised nature of products and
Standard costing is generally not
(vi) processing methods lends itself to the
suitable for jobbing work.
adoption of standard costing.
For WIP valuation operating costs have to be
Work-in-progress valuation is specific
spread over fully complete output and
(vii) and is obtained from analysis of
partially complete products using the concept
outstanding jobs.
of equivalent units.
Each job is separate and Products lose their individual identity as they
(viii) independent of others. Costs are are manufactured in a continuous flow. Costs
computed when a job is complete. are calculated at the end of cost period.
There are usually no transfers from Transfer of costs from one process to another is
(ix) one job to another unless there is a made, as the product moves from one process
surplus work or excess production. to another.
There may or may not be work-in- There is always some work-in-process at the
(x) progress at the beginning or end of beginning as well as at the end of the
the accounting period. accounting period.
Proper control is comparatively
difficult as each product unit is Proper control is comparatively easier, as the
(xi)
different and the production is not production is standardised and is more stable.
continuous.
(xii) It requires more forms and details. It requires few forms and less details.
sDifferences between Absorption Costing and Marginal Costing:

Absorption Costing Marginal Costing


Only variable costs are
Both fixed and variable costs are considered for
1. considered for product costing
product costing and inventory valuation.
and inventory valuation.
Fixed costs are charged to the cost of production. Fixed costs are regarded as
Each product bears a reasonable share of fixed period costs. The profitability of
2.
cost and thus the profitability of a product is different products is judged by
influenced by the apportionment of fixed costs. their P/V ratio.
Cost data are presented in conventional pattern. Cost data are presented to
3. Net profit of each product is determined after highlight the total contribution of
subtracting fixed cost along with their variable cost. each product.
The difference in the magnitude
The difference in the magnitude of opening stock
of opening stock and closing
4. and closing stock affects the unit cost of production
stock does not affect the unit
due to the impact of related fixed cost.
cost of production.
In case of absorption costing the cost per unit
reduces, as the production increases as it is fixed
5.
cost which reduces, whereas, the variable cost
remains the same per unit.

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