Process costing is appropriate when producing masses of identical or similar products, where the total costs are assigned and unit costs are calculated by dividing total costs by the number of units produced. Examples include food and chemical processing. Job costing is used for distinct, identifiable units that use different quantities of resources, like custom machines and houses. A hybrid costing system combines elements of both job and process costing.

2. Successor
 Umair Abbas 0031
 Umair Ahmad 0042
 Ali Mardan Khan 0017
 Muneeb Ahsan 0022
 Shahid Anwar 0034

3. Identify The Situation in Which Process
Costing System are Appropriate
There are the following types of Costing system:
Process Costing
Job Costing
Hybrid Costing

4. Job Costing System
“Distinct, identify units of a product or service”
Example: custom made machines and houses.
Process Costing System
“Masses of identical or similar units of a product or service.”
Example: food or chemical processing.
In Process costing system the unit cost of a product or service is
obtained by assigning total cost to many identical or similar units of output.
In other words, unit costs are calculated by dividing total cost
incurred by the number of units of output from the production process
Formula:
Per Unit Cost = Total Cost/ Number of units of output

5. Conti……
In Manufacturing process costing each unit received the same
or similar amounts of the following:
Direct Material Cost
Direct Labor Cost
Manufacturing Overhead Cost
Hybrid Costing System
“Costing System that combine elements of both job and
process costing.”

6. Difference Between Process Costing
and Job Costing
Job Costing
 Individual jobs use different
quantities of production
resources.
 It would incorrect to cost each
job at the same average
Production cost.
Example:
 In Cloth manufacture different
material are use in different
batches of cloths, say , wool
versus cotton.
Process Costing
 Similar units of products or
services are mass produced use
same quantities of production
resources
 Process costing is use to
calculate an average
production cost for all units
produced.
Example:
 In Cloth manufacture cost per
unit of each operation, such as
cutting or sewing is identical.

7.  Pacific Electronics manufacture a verity of cell phone
models. These models are assembled in the assembly
department. Upon completion, units are transferred to the
testing department. We focus on the assembly department
process for one model, SG-40. All units of SG-40 are
identical and must meet a set of demanding performance
specifications. The process costing system for SG-40 in
assembly department has a single direct cost category –
direct materials and a single indirect cost category –
Conversion Costs.
Example

8. Graphic Representation
Conversion cost added
During process
Transfer
Direct material Added
at beginning Of process
Assembly
Department
Testing
Department

9. I’m ready to process
some leisure time.