Question

In a page, explain the similarities and differences between job costing and process costing methods in a manufacturing environment, and construct and use operational budgets for a manufacturing company.

Answer 1

Answer:

Similarities of job costing and process costing in a manufacturing environment:

• Similarity of job costing and process costing is the both have a same goal of to determine the cost of product.
• Job costing & process costing both have a same cash flow.
• Similarity of job costing and process costing of direct material, labor and manufacturing overhead.
• In the job costing and process costing unit cost information is needed by management for decision making.

Difference between job costing and process costing :

• Job costing is used for unique or customized product, while process costing used for standardized products.
• Job costing costs by individual jobs while in process costing costs by department.
• In job costing calculating cost of each job while in process costing costs is determined for the process the produced units.
• Job costing environment suitable in a batch production while in process costing environment suitable in a MASS production.
• In a job costing costs are collected against each job while in process costing costs are allocated for each process.
• In a job costing material required for job from order to order while in a process costing material required same for every order.
• In a job costing less scope of cost reduction while in a process costing high scope of cost reduction.
• In a job costing cost ascertainment is completion of the job while in a process costing end of the cost period.
• In a job costing work in progress exist at the end of the financial year while in a process costing present at the end of the accounting period.
• Job costing is used for small production while process costing is used for large production.
• In a job costing cost is not transfer while in a process costing cost transfer from one process to another.

Construct and use operational budgets for a manufacturing company :

The construct budget is a short term budget. It is based on estimated income and expenses. The construct budget in that total work units identified by cost accounts.

The operational budget is an important part of a business. Operational budget consists of all revenues & expenses over a period of time. In operational budget includes the cost of material, labor, machinery, transportation etc.

Operational budgets are typically created the start up of the business. Operational budget provide reasonably good estimates the volume & sources with the future expenses & income. At last i can say that operational budgets are used to strategically plan future business goals that the financing that should be needed to achieve goal. In that manager should be compare the reports month after see if a company is overspending on supplies.