JOB COSTING &PROCESS COSTING

Presented BySRIMANT KUMAR MOHARANA

JOB COSTING

Job costing is that form of specific order costing which applies where work is under taken to customer’s special requirements and each order is comparatively short duration . The work is usually carried out within a factory or workshop and moved through processes and operations as constantly identifiable units.

Ex: Engineering jobs, construction jobs, printing jobs, furniture making, fabrication jobs etc.

FEATURES

It is a specific order costing. The job is carried out or the product is produced to

meet the specific requirement of the order. It is concerned with the cost of an individual job or

batch regardless of the time taken to produce it , but normally short duration of time.

Cost are collected to each job at the end of it’s completion.

The cost of job is ascertained by adding material, labour and overheads

Work in progress may or may not exist at the end of the accounting years.

PROCEDURESDirect

LaboursDirect

Materials

DirectExpense

s

FactoryOverhea

d

Work-in -Progress

Add: Administrative, Selling And distribution OH

Cost of Sales

Add: Profit

Selling Price

ADVANTAGES

The profit or loss made on each job can be measured.

It generates the cost data which is useful for the analysis and control by management.

It highlights whether the job is profitable or not.

Job costing enable a comparison to be made with performance on other job so that inefficiencies are identified and rectified.

DISADVANTAGES

Time consuming process Expensive

PROCESS COSTING

It is the costing method applicable where goods or services results from a sequence of continuous or repetitive operations or processes, costs are averaged over the unit produced during the period.Ex: Chemicals and Drugs, Oil refining, food processing, textiles and papers etc.

FEATURES

The process cost centers are clearly defined and all costs relating to each process cost centre are accumulated.

The cost and stock records for each process cost centre are maintained accurately.

The total cost of each process are average over the total production of that process.

The charging of cost of the out put of one process as the raw materials input cost of the next process.

Appropriate method is used in calculation of overheads to the process cost centers.

The process loss may arise due to wastage, spoilage, evaporations etc.

Since the production is continuous in nature, there will be closing work-in-progress.

PROCESS LOSSES

It is usual that certain amount of material introduced into the production process are lost, scrapped or wasted. e.g., evaporation, breakages, spoilages for various reasons.

There is two types of process losses are there:1.Normal loss2. Abnormal loss

1.NORMAL LOSS

The loss expected during the normal course of operations, for unavoidable reasons is called Normal loss.

Ex: Input 100kgOutput 95kg

______Normal Loss 5kg

2.ABNORMAL LOSS

Abnormal loss are those losses above the level deemed to be the normal loss rate for the production process.

Ex: Input 100kg

Less: Normal loss 5kg

________

Expected output 95kg

Actual output 92kg

________

Abnormal Loss 3kg

ABNORMAL GAIN

If the loss is less than the normal expected loss, then the difference between actual output and expected output is called Abnormal gain.

Ex: Actual output 98kgExpected output 95kg

_____Abnormal gain 3kg