Job costing is one of the methods of costing. It is also known as job order costing. In this system, work is undertaken to customer’s specific requirements on the basis of orders. Batch costing is a measure used to determine the number of units that can be produced at minimum average costs in a given batch or production run. In job costing, the cost unit is the executed job, whereas, in the case of batch costing, the cost unit is a particular batch.
Distinguish between Job Costing and Batch Costing –
Job Costing
Job costing is where a unique item is being made and costs can be specifically traced to that item. The job could be large (such as building a house or a ship) or small (such as constructing a set of shelving for a room).
Often jobs are given identifying numbers, such as contract numbers or simply job numbers.
All relevant costs are labeled with that number and the total costs can be accumulated.
- Material costs: either invoices for specially bought material or requisitions from stores can be labeled with the job number so that material costs can be accounted for.
- Labor costs: times sheets can be filled in using the job number to track time spent on the job.
- Other expenses: if direct, then the job number will be noted against that cost; if indirect then expenses are often charged to a job on the basis of time and an overhead absorption rate.
Batch costing
In batch costing several identical items are produced as a batch. Each batch will be given a number so that costs can be traced to the batch. The batch costs can be averaged over the units produced. It is a technique of costing used when a number of matching units are produced in a batch but each batch is dissimilar.
- Product: Products do not lose their individual identity, as they are manufactured in the continuum.
- Cost ascertainment: Ascertained for the whole batch and then per unit cost is determined.
- Accumulation of Costs: In batch costing, costs are accumulated for a batch code number.
