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Where are they used? Match with the following? • Where products produced in distinct batches. • Companies producing fertilizer, refineries, microchips, textiles. • Companies taking contracts for construction of power plants, steel plants, refineries etc.
Job costing is the process of tracking the expenses incurred on a job against the revenue produced by that job. Job costing is an important tool for those who are pairing a relatively high dollar volume per customer with a relatively low number of customers. For example, building contractors, subcontractors, architects and consultants often use job costing, whereas a hardware store or convenience store would not use job costing.
Process Costing is an accounting methodology that traces and accumulates direct costs, and allocates indirect costs of a manufacturing process. Costs are assigned to products, usually in a large batch, which might include an entire month's production. Eventually, costs have to be allocated to individual units of product. It assigns average costs to each unit, and is the opposite extreme of Job costing which attempts to measure individual costs of production of each unit. Process costing is usually a significant chapter.
Contract Costing is A form of specific order costing; attribution of costs to individual contracts CIMA Terminology. A contract cost is Aggregated costs of a single contract; usually applies to major long term contracts rather than short term jobs
Differences between job order and process costing:
The differences between job order costing and process costing arise from two factors. The first is that the flow of units in a process costing system is more or less continuous, and the second is that these units are indistinguishable from one another. Under process costing it makes no sense to try to identify materials, labor, and overhead costs with a particular order from a customer ( as we do with job order costing ), since each order is just one of many that are filled from a continuous flow of virtually identical units from the production line. Under process costing, we accumulate costs by department rather than by order, assign these costs uniformly to all units that pass through the department during a period.
Job Order - used in such a manufacturing process where uints are produced / manufactured on the basis of distinct specifications as per desired by customers eg, Furtinure,Auto Parts,Packaging etc
Process Costing - used in such a manufacturing process where uints are produced / manufactured in same /alike specifications; eg Bevarge , oil refinery,Textiles etc
Contarct Costing is used for projects like construction,Minings,Power Plants etc
Job orders - where products produced in distinct batches. A Job order is the toll to instruct production to produce specific product(s) with specific features and specific quantities at specific times.
Process manufacturing - companies producing fertilizer, refineries, microchips, textiles. Process manufacturing is the type of manufacturing other than discrete manufacturing. Manufacturing here is not to produce a countable units of products (cars, computers, etc.) but to produce quantities of products (steel galvanizing, milk, etc.)
Contract costing - companies taking contracts for construction of power plants, steel plants, refineries etc.. Contract costing is to estimate the cost of performing the job defined in the contract.
