Question

Please explain job costing and process costing in your own words along with how it can be used in daily business life.

Answer 1

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

Process costing method is useful in the manufacturing of products like steel, paper, medicines, soaps, chemicals, rubber, vegetable oil, paints, varnish etc. where the production process is continuous and the output of one process becomes the input of the following process till completion

Job Costing: It is a method of costing which is used where the work is undertaken as per the customer's special requirement. When an inquiry is received from the customer, costs expected to be incurred on the job are estimated and ne basis of this estimate, a price is quoted to the customer. Actual cost of materials, a and overheads are accumulated and on the completion of job, these actual costs are prepared with the quoted price and thus the profit or loss on it is determined Job costing is applicable in printing press Hardware, shipbuilding, heavy machinery, foundry, general engineering works, machine toggle interior decoration, repairs and other similar work