Question

Differentiate between job costing and process costing with your own examples

Answer 1

Answer:

Job Costing: Under job costing costs are allocated & accumulated according to jobs, contracts, products, or work orders, each job or unit of production is treated as a separate entity for the purpose of costing.

Process Costing: Process costing is a method of costing used in industries where the material has to pass through two or more processes for being converted into a final product.

Difference between job costing & process costing:

• Under job costing a job is carried out or a product is produced by the specific orders while under process costing the process of producing the product has a continuous flow and the product is homogeneous.
• Under job costing costs are determined for each job while under process costing cost complied on time basis i.e. for production of a given accounting period for each process.
• Under job costing each job is separate & independent of other jobs while under process costing products lose their individual identity as they are manufacturers in a continuous flow.
• Under job costing costs are computed when a job is completed. the cost of a job may be determined by adding all costs against the job while under process costing costs are calculated at the end of the cost period & the unit cost of a process may be computed by dividing the total costs for the period by the output of the process during that period.
• Each job has a number and costs are collected against the same job number while in process costing the unit cost of the process is an average cost for the period.