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Difference between Job Costing and Batch Costing
Operating a business is expensive because expenses pile up over time. Job costing refers to the procedure through which a company calculates the amount of money needed to produce a product or deliver a service. The smooth running of the business depends on this procedure.
To calculate the cost per unit of production, it is necessary to keep track of all costs, categorize those costs, and assign both indirect and direct costs to individual products. A product's or process's cost per unit can be calculated in this way. It is possible to calculate the price of a service or an item by using either job costing or batch costing.
What is Job Costing?
A job is any assignment, contract, or piece of work that must be completed in accordance with the requirements and expectations of the client. You can use this costing method to figure out how much any of these things will set you back.
It necessitates taking into account the following −
Direct materials − It does this by ascribing such costs to the project or product for which they were incurred.
Direct labor − On the basis of labor expenses, certain amounts of time spent on jobs are allotted to those jobs.
Overheads − The costs of overhead are tallied up and distributed among the various occupations.
The following are some of the many advantages of using job costing −
Expenses for completed jobs are itemized and analyzed to see whether they may be reduced for future initiatives.
Collecting the additional costs and billing the client for them.
It would be particularly useful in industries like shipbuilding, painting, interior design, furniture, and press printing. Also, it works well for industries that tailor their products to meet specific customer needs.
What is Batch Costing?
It's a way to figure out how much something should cost by making a bunch of identical ones at once and then labeling each batch with a number, the total number of items made in that batch, and the unit price. The batch pricing approach is used in this system.
The price of a single item may be determined by dividing the entire cost of the batch by the total number of items in the batch. You may use this to find out how much anything costs. After then, the batch's price is marked up by the company's profit margin.
Businesses that make their products in batches, including those in the textile, engineering, and fast-moving consumer goods industries, might benefit greatly from the batch costing approach.
Differences − Job Costing and Batch Costing
The following table highlights how Job Costing is different from Batch Costing −
| Characteristics | Job Costing | Batch Costing |
|---|---|---|
Definition |
Job costing is a method of costing used to determine how much it will cost to complete a particular job such as a contract, a specific work, or an assignment that must be carried out in line with the specified requirements and preferences of the customer. The term "job costing" describes a technique for doing so. |
Batch costing is a method of determining costs based on batches of identically produced items. In this system, the quantity produced in each batch is tracked together with its unit cost. |
Ideal Industries |
The most productive industries for job costing are those that generate items in response to particular requests and needs from customers such as shipbuilding, decorating, interior design, furniture production, and press printing. |
Industries that manufacture products in batches, such as the textile, engineering, and fast-moving consumer goods sectors, benefit the most from using batch costing. However, batch costing may also be used in sectors where products are made one at a time. |
Terms of production |
Using job costing, you can keep track of how much it costs to produce goods that are tailored to individual orders. |
Accounting for mass-produced goods may be done using a process called "batch costing." |
Cost unit |
The completed task is the basic unit of cost analysis in any work context. |
A batch is used as the cost unit in batch costing. |
Cost derivation |
In job costing, the price per unit is determined once all work is completed. |
By dividing the total cost of the batch by the total number of products in the batch, the cost of each individual product can be calculated using batch costing. The result is the unit price. |
Conclusion
The purpose of job costing is to calculate the monetary value of a certain project. A job can be any kind of contract, specialized work, or assignment that must be completed in line with the specific requirements set forth by the client. Even while both job costing and batch costing try to equitably distribute production expenses, job costing specifically refers to a method of estimating the price of a particular work. Shipbuilding, interior design, furniture production, and press printing are just a few examples of industries that are well-suited to producing goods to the exact specifications of their customers.
In contrast, batch costing is a system of pricing that applies to batches of identical products. Each batch is tracked by its own unique number, quantity, and per-unit cost using this manner. Industries including textile and apparel production, mechanical engineering, and the assembly of fast-moving consumer items are ideal candidates for batch costing.
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