Question

What are the main differences between job, process, and activity-based costing? 200 words

Answer 1

1. Meaning: Job costing can be defined as a process of calculating the cost of a special contract, work order where work is performed as per client's or customer's instructions.
Process costing method can be defined as a process in which the costs which are charged to various processes and operations is ascertained. Activity-based costing is an alternative approach that looks at business activities and identifies the related costs. Those costs are then assigned based on how a specified activity is consumed in the process of production

2. Nature of product: Job costing includes customized production. Process Costing and ABC includes standardized production

3. Scope of cost reduction: Scope of cost reduction in Job costing is less, whereas it's high in Process Costing and ABC.

4. Identity: Each job is different from another in Job costing, whereas products are manufactured consecutively, thus they lose their identity in Process Costing. ABC assigns the each activity cost with resources to all products and services as per the actual consumption by each

5. Industry Type: Job costing is preferred for the industries which manufactures products as per customer's order, the Process costing is suitable for the industry where mass production is done, and ABC costs is suitable in energy industry studies. Process costing is less accurate but more simplistic than ABC