Clear Difference between Job order costing And process costing... Cost accounting ...

2. Presented by:
1-Alvina
2-Hurriya
3-Afia
4-Ameera

3. “According to I.C.M.A London”
Costing is
Ascertainment of cost.

4. “Product costing system”
Set of procedures used to account for an organization's
product cost.
Provides timely and accurate unit cost
information for:
----Pricing
----Cost planning and control
----Inventory valuation
----Financial statement preparation

5. “Types of Product Costing”
 Job Costing System
 Process costing System

6. “Job costing System”
“Job costing is that form of specific order
costing which applies where work is
undertaken to customer's special
requirement.”
 Each order is comparatively of short duration.
 The work is usually carried out in factory or
workshop.

7. “Examples”
 Engineering
 Construction job
 Printing job
 Furniture making etc

8. “Features of job costing system”
 Specific order costing
 Job is carried out to meet specific
requirement of order.
 The profit or loss made on each job can be
measured.
 It highlights whether the job is profitable or not.

9. De-Merits of Job costing System
 Time consuming
 Expensive

10. “Types of Job order System”
 Job order cost-Single unit
 Batch Cost-Identical units
 Contract cost-More than 1 year

11. “Process costing system”
It is a costing method where goods or services
results from a sequence of continuous or
repetitive operations.
Examples:
Chemicals
Drugs
Food processing
Paper industry

12. “Features of Process costing
system”
 The process cost centers are clearly defined
 All cost relating to each process cost centers are
accumulated.
 The cost and stock records for each department
are maintained accurately.

13. “Product costing system”
What are Similarities
and difference between
them???

14. “Similarities in both Systems”
 To assign direct material, direct labor and
manufacturing overhead to products.
 To provide a mechanism for computing unit cost.
 Both systems maintains perpetualinventoryrecords.
 The flow of costs through the accounts is basically
the same.
 Both can be used in manual and computerized
accounting environment.

15. “Difference between Product costing
systems”
“Job order costing”
 Heterogeneous jobs.
 Cost accumulated job wise.
 Cost sheet is the key
document.
 Many different jobs are
worked in different periods.
“Process order costing”
 Homogeneous jobs.
 Cost accumulated department
wise.
 Departmental product report
is the key document.
 A single product is produced
either on continued basis or on
long terms periods.

16. “Usage of Process costing systems”
“Job order costing”
Used by the company
that make: unique or
special order product.
“Product order costing”
Used by the companies
that produce large
amount of similar
products.

18. “Examples”
1-Company`s using Job order costing
 Stylo
( Batch order costing )
 Nirala sweets
( Job order costing)
 Hill holiday advertising agency
( Job order costing)

19. “Examples”
 2- 1-Company`s using processcosting system
 Intelcorporation
( Produces semiconductor chips )
 Cococola
( Produces homogeneous drinks )
 Pepsi
( Produces homogeneous drinks )

20. How does Product flow
in different
departments???

21. “Product Flow System”
 Sequential product flow
 Parallel product flow
 Selective Product flow

22. “Product flow”
1 -Sequential Product flow
“Each item manufactured goes through
the same set of operations.”

23. FOR
EXAMPLE

24. Work in process
Department (A)
Blending Department

25. Work in process
Department (B)
Testing Department

26. Work in process
Department (C)
Terminal Department

27. Finished Goods Department

28. “Sequential Product Flow”
WIP
Blending Department
WIP
Testing Department
WIP
Terminal Department
Finished Goods
Material
Labor
FOH Labor
FOH
Labor
FOH

29. “Product flow”
2-Parallel Product flow
“Certain portion of the work done
simultaneously and then brought
to final process.”

30. FOR
EXAMPLE

31. Work in process
Department #1 (A)
Cutting Department

32. Work in process
Department #1 (B)
Sanding Department

33. Work in process
Department # 2(A)
Paint wax Department

34. Work in process
Assembly Department

35. Parallel Product Flow
WIP WIP
Cutting Department Sanding Department
Dep#1(A) Dep#1(B)
WIP
Assembly Department
WIP
Paint Wax Department
Dep#2(A)

36. Work in process
Painting Department

37. Finished Goods

38. “Parallel Product Flow”
WIP WIP
Cutting Department Sanding Department
Dep#1(A) Dep#1(B) WIP
Assembly Department Painting Department
WIP
Paint Wax Department
Dep#2(A) Finished Goods

39. “Product flow”
3- Selective Product flow
“The product moves to different
departments within the plant.”

40. FOR
EXAMPLE

41. Work in process
Department # 1(A)
Butchering Department

42. Work in process
Department # 1(A)
Smoking Department

43. Work in process
Department # 1(A)
Grinding Department

44. Work in process
Packing Department
After Butchering Packing
After Smoking packing After Grinding Packing

45. Finished Goods

46. “Selective Product Flow”
WIP
Butchering Department
WIP
Packing Department
WIP
Smoking Department
Finished Goods
WIP
Grinding Department

47. “Cost of Production Report"
 Also called Process Cost Sheet.
 It summarizes the data of quantities
 produced and cost incurred by
 producing department.
 Prepared at the end of each costing period.