AIP 9.2 Job-Order and Process Costing LO 1 A management accounting professor was trying to explain the difference between job- order costing and process costing to her class. She pointed out that a job-order costing system is generally used when distinct batches or 'jobs’ can be identified. Alternatively, process costing is used for the continual processing of homogenous products. A student 445 suggested another difference between job-order and process costing. He noted that on the one hand, job-order costs are determined at the time the job is being performed by using pre-determined overhead rates. On the other hand, process costs are normally determined at the end of the period based on the number of equivalent units produced and actual overhead costs. What does the timing difference between job-order costing and process costing say about how job-order costs and process costs are used for planning purposes?
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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