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ACCA105

Job order costing tracks costs for individual units or jobs, while process costing is used when products are indistinguishable. Actual costing uses actual costs incurred, normal costing uses actual costs plus standard overhead rates, and standard costing uses budgeted costs. Job cost sheets record accumulated costs for specific jobs or units and are used by companies that follow job order costing.

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57 views

ACCA105

Job order costing tracks costs for individual units or jobs, while process costing is used when products are indistinguishable. Actual costing uses actual costs incurred, normal costing uses actual costs plus standard overhead rates, and standard costing uses budgeted costs. Job cost sheets record accumulated costs for specific jobs or units and are used by companies that follow job order costing.

Uploaded by

Shane Tabunggao
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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a) Job order costing is system of assigning and accumulating production costs attributable

to specific individual units or product. Process costing is a method of assigning costs when
produced products or services are not indistinguishable from each other.

b) Actual costing is based on the actual cost incurred and actual quantity or hours
consumed to produce products and services.
Normal costing is based on actual quantity or hours consumed to produce products and
services and STANDARD RATE for manufacturing overhead rate.
Standard costing is based on standard (budgeted ) consumption and also standard rate.

c) Job order sheet is a document that records the accumulated costs attributable to a
specific individual units / jobs .These are used by companies following Job order costing

Explanation:
a) Example of job order costing : Often the companies that produce unique and distinct
product based on customer needs use job order costing like professional service
businesses (Accounting , Investment, Law firms) , food companies etc
Example of process costing : Companies producing similar or identical products or services
use process costing like mass production units like processed foods , paints etc

Difference between Job order costing and Process costing :

 Requirement of records :- Higher record keeping is maintained for Job order costing
based on individual job cards and time clocks, these are used to allocate directly to
jobs. Process costing does not require such record keeping because cost can be
identified by dividing total cost incurred by number of units produced.
 Transfer-ability :- Costs in job order cannot be transferred to another job while costs
can be transferred from one process to another
 Work-in-process :- Probability of job order costing having WIP is less and usually it is
for one specific job and not production line. Process costing most of the time has
beginning and ending work-in-process

b) Production costs involve :


Direct material
Direct labor
Manufacturing overheads
Under actual costing actual direct material , actual direct labor and actual manufacturing
overheads are added to product cost
Under normal costing actual direct material , actual direct labor and predetermined
manufacturing overhead costs are added to product cost.Difference is the manufacturing
overhead rate which is based on expected amount of overhead for expected production
volume. Using predetermined overhead rate makes the costing more uniform and realistic
for units manufactured in an year.
Under standard costing the costing is based entirely on estimated or predetermined costs
for direct material , direct labor and manufacturing overhead. It indicates requirement (what
should be) of the company set at the start of production process.
c) Job cost sheets are used to record costs incurred for a single job. It consists of job
number , job description , job start date , job completed date. It maintains information of
direct material , direct labor and overhead assigned to a job. These are used by companies
to segregate costs by job to identify cost of a each product or job. They also serve as
subsidiary ledger that identifies costs for each job.

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