Difference Between Job Costing And Process Costing 1n1p4z

Difference between Job Costing and Process Costing: Job Costing The form of specific order costing which applies where the work is undertaken to customer’s special requirements.

Process Costing That form of costing which applies where standardised goods are produced and (i) production is in continuous flow, the products 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 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, prethe time taken. detarmined rates may be used t products / By-products do not t products/By-products do arise and t (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-inThere 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 ing period. ing 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 1.

Both fixed and variable costs are considered for product costing and inventory valuation.

Fixed costs are charged to the cost of production. Each product bears a reasonable share of fixed 2. cost and thus the profitability of a product is influenced by the apportionment of fixed costs. Cost data are presented in conventional pattern. 3. Net profit of each product is determined after subtracting fixed cost along with their variable cost. The difference in the magnitude of opening stock 4. and closing stock affects the unit cost of production due to the impact of related fixed cost. 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.

Marginal Costing Only variable costs are considered for product costing and inventory valuation. Fixed costs are regarded as period costs. The profitability of different products is judged by their P/V ratio. Cost data are presented to highlight the total contribution of each product. The difference in the magnitude of opening stock and closing stock does not affect the unit cost of production.