Submit a paper which is no more than 2-3 pages in length (no more than 3-pages),
ID: 2335950 • Letter: S
Question
Submit a paper which is no more than 2-3 pages in length (no more than 3-pages), exclusive of the reference page. Paper should be double spaced in Times New Roman (or its equivalent) font which is no greater than 12 points in size. The paper should cite at least three sources, using APA format. One source can be your textbook. In this paper, please discuss the definition, application, and benefits of job order costing and process costing. Compare and contrast the two methods. Superior written essays will mention and explain the following elements: Define job order costing as the detailed accumulation of production costs attributable to specific units or group of units. Define process costing as the accumulation of production costs for lengthy production runs involving products that are indistinguishable from each other. Job order costing generally applies to customized products or projects. Process costing generally applies to large batches of identical product units. The narrative will compare and contrast the two costing methods. Be sure to use APA formatting in your paper. Purdue University’s Online Writing LAB (OWL) is a free website that provides excellent information and resources for understanding and using the APA format and style. The OWL website can be accessed here: http://owl.english.purdue.edu/owl/resource/560/01/
Explanation / Answer
Job order Costing:
Definition: Industries that manufacture products or provide services against orders rather than a continuous process of production use the job order costing method.
Every order in job costing is separate and it is not necessary that same manufacturing operations have to be carried out or same materials have to utilized for every order.
A number of identical orders can be combined to form batches and each batch constitutes a job order.
A job/order can extend to several accounting periods and are therefore not related to particular periods.
Application of Job Order Costing:
Benefits of Job Order Costing:
(a) The cost of material, labour, overheads etc are available for every job on a daily basis.
(b) On job completion, cost under each element is immediately determined.
(c) Historical costs for each product provides an important statistic for budgeting for future and planning for future production.
(d) The actual overhead costs are compared with overhead at predetermined rates and variances can be analysed. .
Process Costing
In process costing, cost of product is ascertained at each process or stage of manufacture. It is used in industries where the process is divided into two or more processes.
The objective is to find out the total cost of process and the unit cost for each and every sub process.
Features of Process Costing:
(a) Production is done on a continuous basis for identical products.
(b)Cost centres and accumulation of all costs by cost centres is clearly defined.
(c) Finished product of one process is the raw material for next process.
(d) In order to obtain correct average cost, it is important to measure the production cost at various stages of manufacturing.
(e) Uniform output is present and all units are identical during one/more process.
Applications of Process Costing:
Industries where process costing is used are many. Below are some examples:
Benefits of Process Costing
Difference between Job Costing and Process Costings
Job Costing
Process Costing
Used when the work undertaken has to be customized according to demands of the customer
Used when goods to be produced are standardized and identical in nature. No customizations are performed
Job is the cost unit and costs are collected for each job
Costs are collected by process i.e. cost incyrred for each process till final good is used to get an average cost for the products
Losses are not segregated
Normal Losses are predetermined and abnormal losses are segregated
Proper control is comparatively difficult as each job is unique
Proper control is comparatively easier as products are standardized and can be implemented for the whole production facility
Standard costing is not suitable
Standard costing is very suitable
It requires more forms and details
It requires comparatively lesser forms and details
References
Job Costing
Process Costing
Used when the work undertaken has to be customized according to demands of the customer
Used when goods to be produced are standardized and identical in nature. No customizations are performed
Job is the cost unit and costs are collected for each job
Costs are collected by process i.e. cost incyrred for each process till final good is used to get an average cost for the products
Losses are not segregated
Normal Losses are predetermined and abnormal losses are segregated
Proper control is comparatively difficult as each job is unique
Proper control is comparatively easier as products are standardized and can be implemented for the whole production facility
Standard costing is not suitable
Standard costing is very suitable
It requires more forms and details
It requires comparatively lesser forms and details