3. Costing
Types Of Costing
Job Order Costing
Procedure Of Job Costing Accounting
Process Costing
Costing Procedure
Product Flow
Types Of Product Flow
Distinction Between Job Costing And
Process Costing
Examples
Table Of Contents
4. Costing system is that system in which we
calculate different cost with different methods
and also monitor cost for reducing wastage
and misuse of resources.
Costing System
6. Job order costing or job costing is a system
for assigning manufacturing costs to an
individual product or batches of products.
Generally, the job order costing system is
used only when the products manufactured
are sufficiently different from each other.
Job Order Costing
7. There is a significant variation in the
products manufactured, the job order
costing system will create a job cost record
for each item, job or special order. The job
cost record will report the direct materials
and direct labor actually used plus the
manufacturing overhead assigned to each
job.
Explanation:
8. An example of an industry where job order costing is used is
the building construction industry since each building is
unique. The manufacturers of custom equipment or custom
cabinetry are also examples of companies that will keep track
of production costs by item or job.
The job cost records also serve as the subsidiary ledger or
documentation for the cost of the work-in-process inventory,
the finished goods inventory, and the cost of goods sold.
Example:
10. 1. Material Cost Accounting
2. Labor Cost Accounting
3. Overhead Cost Accounting
Procedure of Job Costing
Accounting
11. Process costing:
Process costing is a method of costing used
mainly in manufacturing where units are
continuously mass-produced through one or
more processes.
Examples
This include the manufacture of erasers, chemicals or
processed food.
12. In process costing it is the process that is cost
(unlike job costing where each job is cost
separately). The method used is to take the total
cost of the process and average it over the units of
production.
Cost per unit = Cost of inputs / Expected output
in units
Explanation:
13. COSTING PROCEDURE
1. Items on the Debit side of Process A/c.
2. Items on the Credit side
3. Cost of Process
4. Process Losses
5. Normal Loss
6. Abnormal Loss
15. The movement of products within the shop
during each stage of the part's manufacturing
process.
Product Flow:
Supplier
Raw Material
Work in Process
Finished Goods
Customer
17. Sequential Product Flow:
Work in Process ___
Blending Department
Labor
FOH*
Materials
Labor
FOH*
Work in Process ___
Testing Department Work in Process ___
Terminal Department
Labor
FOH*
In a sequential product flow, each item manufactured goes
through the same set of operation,
Finished
goods
18. Parallel Product Flow:
Work in Process __
Cutting Department
Materials
Labor
FOH
In a parallel product flow, certain portion of the work are done simultaneously
and then brought together in a final process or processes for completion and
transfer to finished goods inventory.
Work in Process __
Planning and
Sanding Department
Labor
FOH
Work in Process __
Assembly Department
Materials
Labor
FOH
Work in Process __
Painting Department
Materials
Labor
FOH
Finished Goods
Work in Process __
Melting Department
Materials
Labor
FOH
Work in Process __
Casting Department
Materials
Labor
FOH
19. Selective Product Flow:
Work in Process __
Butchering Department
Materials
Labor
FOH
In a selective product flow, the product moves to different departments within the
plant, depending upon the desired final product.
Work in Process __
Packaging Department
Materials
Labor
FOH
Finished Goods
Work in Process __
Smoking Department
Labor
FOH
Work in Process __
Grinding Department
Labor
FOH
21. Job order costing and process costing are two
different systems. Both the systems are used
for cost calculation and attachment of cost to
each unit completed, but both the systems are
suitable in different situations. The basic
difference between job costing and process
costing are
DISTINCTION BETWEEN JOB COSTING
AND PROCESS COSTING
22. Job Costing vs. Process Costing
Basic Of
Distinction
Job Order Costing Process Costing
Specific Order Performed against
specific orders
Production is Contentious
Nature Each job many be
different.
Product is homogeneous
and standardized.
Cost
Determination
Cost is determined for
each job separately.
Costs are complied for each
process for department on
time basis i.e. for a given
accounting period.
Cost
Calculation
Cost is complied when
a job is completed.
Cost is calculated at the end
of the cost period.
23. Control
Proper control is
comparatively difficult as
each product unit is
different and the
production is not
continuous.
Proper control is
comparatively easier as the
production is standardized
and is more suitable.
Transfer
There is usually not
transfer from one job to
another unless there is
some surplus work.
There is always some work-
in-progress because of
continuous production.
Work-in-
Progress
There may or may not
be work-in-progress.
There is always some work-
in-progress because of
continuous production.
Suitability
Suitable to industries
where production is
intermittent and customer
orders can be identified in
the value of production.
Suitable, where goods are
made for stock and
productions is continuous.
24. Examples of products costs
Fuel extraction industry
Cotton and cotton-based products
Cement
Fertilizer
edible oil
Sugar
Pakistan Steel Mills
Chemicals
Machinery