Job, Batch & Process Costing Flashcards
CHAPTER 8
Costing system
A system of collecting costs which is designed to suit the way that goods are processed or manufactured or services are provided
Job costing
Each cost unit (job) is separately identifiable
OR
Cost are attributed to indivual job
Job
A cost unit which consists of a single order or contract
Characteristics of job costing
○ Carried out following special requirements of each job
○ Each job differs in one/more respects from every other job
○ Separate record must be maintained
○ Continuously identifiable unit
Procedure in jobbing
1) Customer approaches supplier and tells requirements
2) Supplier sees the prospective
3) Agrees the precise details - quantity, quality, date of delivery
4) Estimating department prepares an estimate
5) Total estimates –> Quoted selling price
6) Job loaded in factory floor –> Job started
Difference between agreed selling price & total actual cost will be ……….?
The supplier’s profit/loss
Job costing systems purpose
Control the costs of internal service departments
Batch costing
Each batch of similar articles is separately identifiable
Common equipment is used to produce batches of different products
Products are not made for a specific job but for inventory using a single production line
Batch
A cost unit which consists of a separate, readily identifiable group of product, maintain its separate identity throughout production process
Cost/unit in batch costing =
Total batch cost / Number of units in a batch
Process costing
Output consists of a continuous stream of identical units
Normal loss
- Expected
- Unavoidable
- Not given a cost
Cost/unit =
Cost incurred / Expected output
Abnormal loss
Actual loss > Normal loss
Abnormal gain
Actual loss < Normal loss
