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Assessment (2)

Assignment-Rubric

Topic: Job Costing Versus Process Costing

Semester: Fall 2022/2023

Faculty : Business Administration

Department : Business Division/ program: Accounting

Course Name : Cost Accounting Course Code: BACC 403

Name : Neamat Al Hassan ID: 202002905

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JOB COSTING Vs PROCESS COSTING

Table of Contents

Introduction....................................................................................................................................................2
Difference between job costing and Process costing......................................................................................3
What is Job costing.........................................................................................................................................3
What is Process costing..................................................................................................................................4
Key Variations:................................................................................................................................................5
Conclusion......................................................................................................................................................7
References......................................................................................................................................................7

Introduction.

Cost management gives the business-critical information that helps in

planning and decision-making to assist the achievement of the strategic
objectives. Profit maximization is the goal of every organization.
Cost estimation, according to Blocher et al. (2019), is a key component of
strategic management. There are two methods for estimating these cost
estimates: job costing and process costing. Job costing is used for each
job, and customized or unique products or services are the distinction
between these costing methodologies. With process costing, each step of
the production process—rather than just the job—is used to calculate the
cost.
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Job costing and Process costing has distinguishing features. Job costing
deals with discrete systems. When products are made continuously, a
process costing system emerges.

The difference between Job costing and Process costing.

In the event of the job Costing, expenses of the unique agreement are
determined where the work is finished by the directions of the particular
client of the organization, though, in the process costing, the expense is
charged to an alternate course of the not entirely set in stone.

Process costing is each occupation done during a task or undertaking.

Though process costing is the all-out cost of the cycles carried in the
whole venture.

What is Job costing.

Job costing is a technique for figuring out how much each "job" costs. A
job is a contract or a project where the work is carried out in accordance
with the needs and specifications of the customer. Typically, the output is
one unit or less. Each task is viewed as a separate project and a separate
entity for:
- based on the demands of the client.
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- Each task must be completed in a way that satisfies its unique

requirements because no two jobs are alike and are heterogeneous.
- Each period's work-in-progress varies from the previous one.
It works well in businesses where goods are produced in response to
client requests. Examples of these industries include shipbuilding,
furniture manufacturing, and interior design.

An important aspect of job costing is the cost sheet. This is a form on

which charges for direct
materials, direct labor and indirect manufacturing cost are accumulated as
work on a job proceeds.

JOB COST SHEET FORM

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What is Process costing.

Process costing is a technique for estimating each project's cost. The

procedure can be described as a discrete step when the raw material is
changed into a different form. The use of process costing is common in
sectors with a large number of identical goods.

The entire process is separated into smaller processes in process costing,

and the work is carried out in a waterfall fashion, in parallel, or even
sequentially. Each process adds up to the total of all the processes. One
process's output serves as the input for another. The ultimate output or
result is produced at the conclusion of the procedure.

Process costing works best in large production settings when a product is

produced at several stages. Examples include paint, soap, iced beverages,
and munchies.

Key Variations:

The following are the key distinctions between the two:

 In job costing, the cost is determined after the project is finished.

But under process costing, the price of every job is calculated.

 When producing unique products, job costing is used; when

producing uniform products, process costing is employed.

 Casting losses in a job can be divided, however in the case of later,

losses are divided based on procedures.
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 When a job is moved from one assignment to another, the transfer

cost is not taken into account in the work pricing. The cost of the
previous processing stage is carried over to the following processing
stage in the case of process costing
.
 Due to the ability to specify the details of the actual prices, job
pricing simplifies the invoicing process for both consumers and
owners.

 Recordkeeping is an essential but time-consuming operation in job

costing since time and materials are taken into account when
determining the cost of the job. whereas in the costing process, the
expense is collected, making record keeping simple.

An image figure showing the difference between the job order costing and
the process costing system.
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 ‘Fundamentally the two polar extremes of product costing are

usually labelled job-order costing and process costing’. Other
sources referring to job costing and process costing make the
following statements:
‘Hybrid cost systems do not represent separate systems, but rather
represent modifications or extensions of the cost accounting systems
described above’.
‘These types and bases are fundamental. Any cost procedure falls into
some combination of the above types of cost system and bases of
costing’.
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Job costing versus Process Costing Comparative Table

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Infographics of the 2 costing systems.

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Conclusion.

There cannot be any comparisons between task and process costing

because they are employed differently in different sectors. Although the
approaches are different, the key distinction may be that process costing
does not require as much oversight as task costing does.

Additionally, there are circumstances where a business may have both.

For instance, a business might make a lot of goods but alter or personalize
them before delivering them to the client or clients. Since both costing
components are used in this instance, the system is referred to as a hybrid
one. Both of these procedures are applicable to manual and electronic
accounting systems.

References.

Hoque, Z., 2005. Job Order Costing. Handbook of cost and management accounting,
London, pp.61-67.
Layne, W.A., 1984. Job Costing, Unit Costing, Process Costing and Joint Product
Costing— ‘The Quartet’. In Cost Accounting (pp. 57-96). Palgrave, London.
Anta, D.G. and Iacob, M.I., JOB-ORDER COSTING VERSUS PROCESS
COSTING.
PARTINGTON, G., 1979. Process costing: A comment. Abacus, 15(1), pp.60-66.
Images and figures Source: Job Costing vs Process Costing (wallstreetmojo.com)