PROCESS COSTING PROCESS COSTING is a method of cost accounting applied to production carried out by a series of chemical or operational stages

or processes. Its characteristics are that costs are accumulated for the whole production process and that average unit costs of production are computed at each stage.

Features of Process Costing: Production is continuous in a series of stages called processes. Each Process is deemed as a cost centre and costs are accumulated for each process separately along with finished output and in progress. Products and Processes are standardised. The output of one process becomes the raw material to the next process,usually till the final product is completed. The cost of the previous process is transferred to the next process along with the output.Sometimes, the transfer may be at a transfer price inclusive of profit. There may be process losses of the input.They may be normal or abnormal or both. Completed and semi-finished goods must be expressed in common terms for cost determination. Since Production is of identical units, the total cost of a process is to be divided with the unit of output to obtain the average cost per unit.

Two or more products may be produced unavoidably in the same process.They may be of equal importance or of disproportionate values. It is not possible or necessary to trace or identify specific loss of material inputs with product or output. Advantages of Process Costing : Cost of each process and that of finished products can be determined at short intervals,weekly or daily. Cost control and control over production are more effective because of uniform output and usage of predetermined costs as budgeted or standard costs. Cost ascertainment is simple and less expensive. Average cost per unit can be easily obtainable. Indirect expenses can be apportioned and allocated more accurately and relaible data can be obtained. Valuation of inventories is easier and accurate. Quotations become easier due to standardised processes. Disadvantage of Process Costing: Costs obtained at the end of processes are historical costs and their utility for cost control and managerial decision making is not significant. Inefficiencies in process can be concealed. Later processes may be adversely affected due to the inefficiency of earlier processes. Evaluating the efficiency of individual workers or supervisors is difficult.

Apportionment of Joint Costs to common products may lead to irrational pricing decisions.

JOB-COSTING

A method of accounting that accumulates the costs of a product/service that is produced either customized to meet a customers specification or in a batch of identical product/services. Principal features. Comprehensive records on labour and material costs associated with any job. Stored information includes, job code, job description, client/customer, job type, recovery percent, memo, budget for labour, budget for disbursements, budget for 'bought-ins' and a budget for total sales to the client for the job. Optional other information includes a 'check-list' of procedures or steps to be carried out in the course of completing the job and also up to two screens of notes associated with each job. A transaction day-book is recorded for all costs and includes, date, job code, labour hours quantity or value, employee or reference/invoice/order number, comment, work-stage code (999 work-stages -user defined), disbursement type (99 types -user defined), employee cost rate per hour (4 user-defined rates for each

employee) and a 7 digit analysis code. Resulting accumulated information stored on each job includes, date of last movement, total labour hours, total labour hours in each work-stage, total labour costs value, total labour costs value in each work-stage, total disbursement value, total disbursement value in each work-stage, total disbursement value for each disbursement type, total sales to client associated with job and percentage variance of actual costs against budgets for labour, disbursements and bought-ins. Power enquiry on full job-card details with different search modes. Standard management reports including: cost lists, variation reports, monthly progress reports, employee reports, work-in-progress reports, job lists by customer and day-book transaction analysis reports by many filters. Full job printout giving all transaction detail including totals for each work-stage, totals for each disbursement type and budgets. Open-item accounting with stored transaction for every movement in cost. Built-in self-audit and status report on file consistency. Automatic data-recovery in the event of hardware failure or power failure. Day-book transaction archive for each year. Keep archives for any number of years allowing full day-book line-detail and cost history. Searching facilities included.

Optional notes pages for each job-card as well as all the normal details. Options for Networking and Multi-company. Optional integration with Purchase ledger, Sales ledger, Stock control, Purchase order processing Contracts ledger, Subcontracts ledger and General Ledger. Many other 'custom' links are available.

Job Costing vs Process Costing Job Costing basically refers to the costs that are encountered in the businesses related to manufacturing goods. Job Costing ledgers, wherein such costs are recorded, form an integral part of the final account statement of the manufacturers. This type of costing involves recording the costs as per the specific jobs rather than a particular process. However, Process Costing refers to the methodology involved in calculating the costs that are incurred while performing a particular task or undertaking a specific process. This might involve the costs that are either incurred directly or indirectly. Job Costing involves the costs of every individual unit of production. However, Process Costing involves the costs that are averaged for each production unit. As per the definition, Process Costing is a method that is applied to the manufacture business that is held together by various continuous or repetitive processes. Process Costing works efficiently for the industries that are known

to produce a single type of product. Both of these terms signify the costs related to labor, material and overhead costs. Process Costing helps to keep a tight reign over the monthly expenditures in a manufacturing business. As an example, Job Costing involves the costs that form salaries of labors working in a particular process whereas Process Costing involves the costs of the processed or manufactured goods undertaken by different departments. One of the major differences between Job Costing and Process Costing is that the Job Costing can be carried out while a particular job is going on. However, Process Costing can be achieved only when all the processes are completed. Moreover, when it comes to documentation, in case of Job Costing, the job cost sheet isimportant whereas in Process Costing a document having deposition and accumulation of various costs is important.