Costing systems are methods used by the company to assign costs to products and projects. In general, there are two types of costing systems: job costing and batch costing. Job costing is a process in which the cost of a single product or service is allocated to the production of that product or service. Whereas, batch costing is a process in which the costs of different products are combined and allocated to a group of similar products or services. This article is about their difference with a table so that we will be able to understand them clearly. The content of this article has been managed as;
What is Job Costing?
Job costing is a method of allocating costs to individual units of products or services. In job costing, the cost of each job is tracked separately. This information can be used to determine the cost of each unit produced and to assess the profitability of individual jobs. Job costing is often used in manufacturing businesses, where products are typically made to order. This system can also be used in service-based businesses, such as construction or professional services.
In this system, at the receipt of an inquiry from the client, the price to be incurred is ascertained, and primarily based totally at the estimate, the fee is quoted. The price of material, hard work, and overhead incurred in the course of the activity is accumulated, and while the activity is accomplished, those are as compared with the quoted fee, on the way to decide the income or loss of every activity.
Additionally, in job costing, direct materials, direct labor, and overhead costs are all assigned to specific jobs. This information can be tracked using a job cost sheet. The job cost sheet includes a record of all the costs incurred for a specific job, as well as the number of units produced.
Advantages Of Job Costing
The advantages of job costing include its ability to track the profitability of individual jobs and to provide accurate costing information for pricing purposes. Job costing can also help businesses to identify inefficiencies and areas where costs can be reduced.
Disadvantages Of Job Costing
The disadvantages of job costing include the potential for accounting errors and the need for extra record-keeping. Job costing can also be time-consuming and may require additional staff resources.
What is Batch Costing?
Batch costing is a method of assigning manufacturing costs to units/groups of production. This costing method is used when products are manufactured in batches. The unit cost of each product is determined by dividing the total manufacturing costs of the batch by the number of products in the batch.
Batch Costing can be understood as a version of process costing. In this system, a collection of same gadgets, comprising a batch is used as a value unit, to estimate value. To confirm the value according to the unit, the whole value of the batch is split through the range of gadgets produced in a batch. For every batch, a value sheet is ready and maintained, through dispensing a batch range
Additionally, batch costing is often used in industries where products are produced in batches or groups, such as the food industry, the pharmaceutical industry, and the chemical industry. This costing method can also be used in other industries, such as the automotive industry, where products are produced in small batches.
Advantages Of Batch Costing
The main advantage of batch costing is that it allows companies to assign manufacturing costs accurately to each unit of production. This costing method is also relatively simple to use and understand.
Disadvantages Of Batch Costing
The main disadvantage of batch costing is that it can be expensive to set up and maintain. This is because companies need to track the manufacturing costs for each batch separately. In addition, batch costing can be less accurate than other methods, such as process costing, if not managed properly.
How Both Differ From Each Other(Main Difference)
In job costing, the cost of each job is tracked separately. This allows managers to see how much each job is costing and make decisions accordingly. In batch costing, the cost of a group of products is tracked together. This can be helpful when products are similar and production costs are similar. However, it can be difficult to track individual product costs this way.
Job Vs Batch Costing(Comparison Table)
|Basis For Difference||Job Costing||Batch Costing|
|Definition||Job costing refers to a particular costing method, used while the production/work is finished in line with the necessities of customers.||Batch Costing is a costing technique that can be used to assign production costs to groups or batches of merchandise|
|Production||As the demand and necessity of the customers||In large units or groups|
|Calculation||Daily||Weekly or monthly|
|Main Advantage||Job costing includes its ability to track the profitability of individual jobs and to provide accurate costing information for pricing purposes.||The main advantage of batch costing is that it allows companies to assign manufacturing costs accurately to each unit of production.|
|Disadvantage||Job costing includes the potential for accounting errors and the need for extra record-keeping.||The main disadvantage of batch costing is that it can be expensive to set up and maintain. This is because companies need to track the manufacturing costs for each batch separately.|
|Cost Ascertainment||Cost is assigned on the completion of each unit or job||Ascertained for the complete batch after which in step with a unit fee is determined.|
Key Differences Between Job And Batch Costing
- Job costing is a method that is used to account for the costs associated with specific jobs, products, or projects. On the other hand, Batch costing is a method that is used to account for the costs associated with groups or batches of products.
- While job costing is a modern concept, batch costing is an old concept.
- Job costing is useful for the ones industries that produce or manufactures items as in keeping with the customer’s demand. On the contrary, batch costing is useful for the ones small industries that produce or manufacture merchandise as in keeping with the batches.
- In job costing, every product has a completely unique identity, as every task is different from other jobs concerning fabric used, client needs, hours of hard work worked, etc. In batch costing, merchandise generally loses its identity, as they’re produced withinside the continuum.
Job costing and batch costing are two methods of product costing. The main difference between job and batch costing is that job costing is used when products are manufactured according to customer specifications, while batch costing is used when products are produced in batches. While both methods assign production costs to products, job costing assigns all manufacturing costs to a specific job or order, while batch cost accounting assigns manufacturing costs to a group of similar products known as a ‘batch.’