Briefly compare and contrast job costing with process costing.
Job costing, according to Heisinger and Hoyle (2012) is a “system of assigning costs used by companies that produce unique products or jobs” while on the other hand, a process costing is a “system of assigning costs used by companies that produce similar or identical units of product in batches employing a consistent process” (p. 242). In other words, in a job costing system, a company can accumulate production cost to a specific unit. It is often used by companies involved in creating customized products like airplanes, advanced technology systems, and accounting. As for a process costing, it often involved the accumulation of costs for lengthy production runs, especially products …show more content…
This is how various departments will requisition direct materials and have various journal entered until the job is completed. While each department has different work-in-process inventory accounts used to track production costs, they also have direct labor costs that are recorded directly in the production department’s work-in-process inventory account. This often reflects as wages payable. Additionally, various production departments will record an overhead cost in the manufacturing overhead journal with the appropriate entry. Eventually, every department would then prepare its report for the assessment of the finished …show more content…
The first step is to summarize the physical flow of units and compute the equivalent units for direct materials, direct labor, and overhead. This is done by using the basic cost flow equation and the unit account for including the beginning balance (BB) and transfers in (TI), ending balance(EB)and transfers out(TO).The second step is to summarize the costs to be accounted for (separated into direct materials, direct labor, and overhead). In this aspect, the production cost report summarizes the costs in beginning WIP inventory and the costs incurred during the period. The third aspect in generating a production cost report is to calculate the cost per equivalent unit using a simple equation formula of Total costs to be accounted for divided by Total equivalent units accounted for. This is equal to Cost per equivalent unit. The fourth and final step in generating a production report is to use the cost per equivalent unit to assign costs to (1) completed units transferred out and (2) units in ending WIP inventory. These are the four basic steps to generating a production cost
Job costing, according to Heisinger and Hoyle (2012) is a “system of assigning costs used by companies that produce unique products or jobs” while on the other hand, a process costing is a “system of assigning costs used by companies that produce similar or identical units of product in batches employing a consistent process” (p. 242). In other words, in a job costing system, a company can accumulate production cost to a specific unit. It is often used by companies involved in creating customized products like airplanes, advanced technology systems, and accounting. As for a process costing, it often involved the accumulation of costs for lengthy production runs, especially products …show more content…
This is how various departments will requisition direct materials and have various journal entered until the job is completed. While each department has different work-in-process inventory accounts used to track production costs, they also have direct labor costs that are recorded directly in the production department’s work-in-process inventory account. This often reflects as wages payable. Additionally, various production departments will record an overhead cost in the manufacturing overhead journal with the appropriate entry. Eventually, every department would then prepare its report for the assessment of the finished …show more content…
The first step is to summarize the physical flow of units and compute the equivalent units for direct materials, direct labor, and overhead. This is done by using the basic cost flow equation and the unit account for including the beginning balance (BB) and transfers in (TI), ending balance(EB)and transfers out(TO).The second step is to summarize the costs to be accounted for (separated into direct materials, direct labor, and overhead). In this aspect, the production cost report summarizes the costs in beginning WIP inventory and the costs incurred during the period. The third aspect in generating a production cost report is to calculate the cost per equivalent unit using a simple equation formula of Total costs to be accounted for divided by Total equivalent units accounted for. This is equal to Cost per equivalent unit. The fourth and final step in generating a production report is to use the cost per equivalent unit to assign costs to (1) completed units transferred out and (2) units in ending WIP inventory. These are the four basic steps to generating a production cost