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Job costing:

y This deals withthe cost determination of orders or jobs.y Itissuitable in a production environment where eachnew orderis different from the

earlier orsucceeding order.

yExamples are

Shoe manufacturing-requires differentspecification

Garment manufacturing-orders differssignificantly

Vehicle repairshops- each repair requires different parts replacement and laborhours

Process costing:

y determinesthe cost perunit of productin an environment where IDENTICAL productisproduced for all customers;

y Examples:y Automobile assembly line-all cars coming out are identicaly Electronic assembly line where all productsisidenticaly Biscuit manufacturingthoughhas more than one product line; each line is a separate,

continuous process producingidentical products.

Tabulated below is the contrast between Job and Process Costing

Job Costing ProcessCosting

Environment Suitable in a Batch production Suitable in a MASS production

MaterialsMaterials required for job variesfrom orderto order

Materialsneeded are same forevery order leadingto bulk

purchases opportunity

DirectLabor

Skilled laborvaries accordingtochangingspecification

Unskilled workers who carry ouspecific tasks repeatedly which

form small part oftheproduction process.

Production runsEach production runis relativelyshort asthe productionis carried

out forspecific orders.

Big quantities are producedleadingto longer production

runs

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Cost Perunit Varies from orderto order Remainsthe same for all orders

Process of finished productThe finished product produced

afterthe performance ofthe jobThe finished product of firstprocess becomes raw materials

ofsecond process

Similarity between products

Productsvaries from job to job

depending on order

All products are equal innature

i.e-identical innature

Time requirement

It requires a long period for order

accomplishment

The inputis processed among

several process and takesverylesstime

Cost accumulation

Cost are accumulated by individual

jobs

Costs are accumulated by

department

Calculation ofunit costUnit costs are computed byjob on the job cost sheet.

Unit costs are computed by

department onthe departmentproduction report.

It is a single process Itis a continuous process

Where applicable

Job costingistypically used by

industriesthat manufacture

customized and heterogeneousproducts

ProcessCosting method isused bthe industriesthat are involved inmass production ofhomogenous

products