Difference between Job Costing and Process Costing

Learn about the differences between Job Costing and Process Costing.

Difference # Job Costing:

1. Production of Goods:

Goods are produced against specific orders.

2. Cost Collection:

Costs are accumulated for specific cost centre i.e. a specific job.

3. Applicability:

Job costing is applicable where the objec­tive is to identify the cost with specific job.

4. Time Period:

In Job Costing the production period may be more than one accounting period. Here, time factor is ignored, only costs are accu­mulated. Job Costs are computed when the jobs are complete for a specific product.

5. Transfer of Cost:

Cost of product is not transferred from one job to another.

6. Computation of Unit Cost:

In Job Costing unit cost is obtained by dividing the cost of the job order by units produced in the job order.

7. Work-in-Progress:

In Job Costing one work-in-progress account is maintained. Different jobs may or may not have opening or closing work- in-progress.

8. Purpose:

In Job Costing production is dependent on customers’ orders and specifications.

9. Managerial Control:

More managerial attention is required because production is not in continuous flow and each job is independent.

Difference # Process Costing:

1. Uniform production is carried on in continuous flow.

2. Costs are accumulated for the entire departments or processes.

3. Process Costing is applied in case of mass production of similar units which continu­ously pass through different processes. Under process costing, individual products lose their identity.

4. In Process Costing costs are accumulated for processes for a given time period. Process costs are calculated at the end of the cost period.

5. Costs of one process are transferred to another process. The finished product of one process becomes the raw materials of the next process until the goods are com­pletely manufactured.

6. Under Process costing the unit cost is com­puted by dividing the process costs by the units produced by the process.

7. As the production is in continuous flow there is always an opening and closing balance of work-in-progress.

8. Production is carried on for building stock and for future sale.

9. As the production is in continuous flow and process production is standardised, mana­gerial control is comparatively easier.