Question

ABC vs. PROCESS COSTING & JOB-ORDER COSTING

How do the three compare? What are the advantages, disadvantages, and applicability for each?

Answer 1

Activity based costing vs Process costing vs Job order costing

1. Activity based costing is a method which apportion the cost of each activity anything happening in the organisation.

2. Process costing will calculate the total cost of each and every process that was performing in the organisation

3. Job order costing method apportion all the cost on the basis of each job that was accepted by the organisation.

Applicability of each method.

Activity based costing is applicable to many service based organization example hospitals deciding cost of each surgery.

Process costing is applicable to industry where goods or services come out from sequence of process. Example manufacturing of sugar. It involves in many process from sugarcane to sugar

Job order costing is applicable to to all works contracts which involves in both service and production involve to complete on order. Example restaurant services involves in preparation and serving food to customers.

Advantages and disadvantages of all costing methods

1. Every method have its own advantages and disadvantages

2. We cannot say that particular method is wrong and one particular method is correct.

3. Coating method to be selected based on the nature of bussines that organisation do.

These are all the information required to solve the given question.

I hope, all the above given information and explanations are useful and helpful to you

Thank you.