Ans. An advertisement bureau uses occupation bing for an advertisement run for Pepsi because it is likely to be really specific to that single client. The chief purpose of occupation costing is to place all the specific facets of each occupation. Whereas, Process costing can be used to calculate the cost of each look intoing history backdown. The procedure of look intoing history backdowns is similar for many clients. In Job Costing, costs areA assignedA to a batch or “ batch ” of a merchandise or service while in a procedure costingA system, theA cost of a productA or service is obtainedA by usingA broadA norms to delegate costs toA multitudes of indistinguishable or similarA units.
The term occupation bing and procedure costing can be defined as:
Job Costing: It involves the computation of costs involved in a building “ occupation ” or the fabrication of goods which is done in distinct batches.
Procedure costing: It is an accounting methodological analysis that identifies and accumulates direct costs, and allocates indirect costs of a fabrication procedure.
In a procedure bing system if we assume that all units receive the same sum of direct stuffs and transition costs. The unit costs can be averaged by spliting entire costs in a given accounting period by entire units manufactured. This attack is for illustration used by Bankss to calculate the unit costs of 100.000 similar client sedimentations made in a month. It is normally used by organisations with mass production of standard units and no uncomplete units after the period.
In a Job-costing system the cost object is a unit or multiple units of a separate merchandise or service called a occupation. Each occupation involves different sum of resources. The merchandise or service is frequently a individual unit, such as a fix occupation done at an Audi Service Center, or an advertisement run produced by Pepsi. An advertisement run for one client at Pepsi differs greatly from advertisement runs for other clients.
Job Costing
It involves the computation of costs involved in a building “ occupation ” or the fabrication of goods which is done in distinguishable batches. The costs areA assignedA to a batch of a merchandise or service and it identifies all the specific facets of a peculiar occupation.
There are seven stairss in occupation costing:
( 1 ) Identify the job-
The 1st measure in the occupation bing procedure is to place the range of the occupation. A fabricating company might place the order to be produce. A architectural house, may affect the design of a high-rise edifice. In order to execute a occupation accurately it is of import to cognize everything what the occupation entails.
( 2 ) Identify the direct costs of the job-
This measure involves designation of direct costs which are associated with a occupation. If the occupation is to fabricate 10,000 Pepsi there are direct costs involved including the ingredients needed to do the Pepsi. Other direct costs associated with a occupation are labour costs. It tells you how many employee hours will be needed to finish the occupation and multiply it by the mean hourly pay.
( 3 ) Select the cost allotment bases to utilize for apportioning indirect costs to the job-
The undertaking will incur indirect costs with the direct costs associated with a occupation. Examples include the usage of equipments in fabrication, the power to run a equipment, wages of supervisor or directors supervising the occupation, even the depreciation on machines used in the procedure of fabrication. Allocation base involves looking at old occupations and calculating the indirect costs totaled at the completion of the undertaking.
( 4 ) Identify the indirect costs associated with each cost allotment base-
The 4th measure after the allotment bases are defined & amp ; indirect costs are identified for the new undertaking. Using the Pepsi Manufacturing illustration, indirect costs might include the machine hours needed to do the units of Pepsi or the figure of supervisor hours to look over the industry of the Pepsi.
( 5 ) Calculate the rate per unit of each cost allotment base used to apportion indirect costs to the job-
The cost allotment bases in measure 3 are the entire indirect cost figures based on completed occupations or undertakings. Determine a individual unit rate by taking the entire cost figure and spliting it by the figure of individual units that were produced in the anterior undertaking. This individual unit rate will be used in the computation of indirect costs for the new undertaking.
( 6 ) Calculate the indirect costs allocated to the job-
To find the entire indirect costs, the individual unit cost rate that was calculated in measure 5 is multiplied by the figure of units to be produced. It will supply the estimated entire indirect costs of all the costs being incurred.
( 7 ) Calculate the entire cost of the occupation by adding all direct and indirect costs assigned to the job-
The last measure in occupation bing procedure involves adding direct costs to the indirect costs that have been calculated in order get the estimated cost for the entire undertaking. Then compare this figure with the figure given to the client to finish a occupation. The difference between the 2 figures gives either the net income or the loss for completion of a certain undertaking.
Procedure bing
Procedure costing is an accounting methodological analysis that hints and accumulates direct costs, and allocates indirect costs of a fabrication procedure. It can be used to calculate the cost of each look intoing history backdown. The procedure of look intoing history backdowns is similar for many clients. In a procedure costingA system theA cost of a productA or service is obtainedA by usingA broadA norms to delegate costs toA multitudes of indistinguishable or similarA units.
Advantages of Process Costing
The chief advantage of procedure costing is the easiness & A ; simpleness of accounting. Procedure Costing is a simple and direct method to determine cost which involves roll uping the overall costs from each section. It fundamentally ignores the costs related to the particular occupations within a section. This in bend reduces the volume of informations & A ; makes informations aggregation quick & A ; easy. This analysis does non necessitate any specialised accomplishments than normal accounting accomplishments. The utilizations of a procedure bing aid to set up a effectual control over the production procedure.
It allows budgeting of the end product and use costs as the criterion costs by doing it possible to track divergences from standard costs with easiness. It becomes possible to look at the inefficiency or disagreement in a specific procedure or section without look intoing each section or procedure.
It facilitates easy & A ; accurate trailing of stock list.
Procedure bing makes it easy to obtain the mean cost of a merchandise leting accurate estimations to clients.
Compared to other methods of bing such as activity based costing, procedure costing is considered to be cheap & A ; make non run out the organisation ‘s resources and clip.
Disadvantages of Process Costing
Procedure costing is fundamentally for homogenous merchandises as it fails to supply an accurate estimation of merchandise costs when a individual procedure produces many points or different types of a same point. It remains suited merely for majority procedure works & A ; non for customized orders. Allotment of the joint costs to distinguish merchandises may take to irrational pricing determinations. While the procedure bing enables budgeting of criterion costs, the costs being obtained are historic & A ; non current and their usage for the determination devising remains limited. Procedure bing makes it easy to offer estimations as it deviates from the standard merchandise or leting options for value-added service. Process bing helps to repair standard costs of production and accumulates all costs and reassign them to units as mean costs and raise the possibility of privacy of inefficiencies in a procedure. Procedure bing steps the efficiency of single procedures & A ; besides evaluates productiveness of an single worker hard.
This reappraisal of the advantages and disadvantages of procedure bing indicates that procedure costing is a utile direction accounting tool for big companies such as Coca Cola that mass produce homogenous merchandises.
Difference between Job bing and Process Costing:
Footing Of Difference
Job bing
Procedure bing
1.Cost Calculation
1.Costs are computed for each occupation individually.
1. Costss are computed for each procedure over a period of clip i.e. production for a procedure during a given period.
2.Cost Unit of measurement
2. The cost unit in instance of occupation costing is “ a occupation ” .
2. The cost unit in instance of a procedure costing is “ a procedure ” .
3.Nature
3. Each occupation may be different. Production is non uninterrupted.
3. Each procedure for a entire end product is the same and by and large production is uninterrupted.
4.Supervision and Control
4. Greater supervising and control by the direction is required
4. Relatively less control is required since the work in procedures gets standardized.
5.Completion of occupation
5. Completion of occupation is necessary for calculation of cost of the occupation. Once the occupation is completed all costs are added to determine the entire cost of the occupation.
5. Completion of the occupation is non awaited. For accounting cost per unit is computed by spliting the entire cost bt procedure end product.
6.Specific orders
6. Job is executed against orders.
6. It is non necessary under procedure costing. Goods are for mass ingestion and hence they may be produced on a go oning footing.
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Master Document Text
INTERNAL RESEARCH ASSIGNMENT Name of the campaigner: Gaurhari gopal Enrollment no. : 048 80303912 Course: MBA Batch: 2012-14 Subject: Accounting for Management Subject codification: MS 107 Topic of assignment: Question 3 Subject Teacher ‘s name: Ms. Ethi Jain Assignment Submission Form ( For office usage merely ) Enrollment No. : … … … … … … Name: … … … … … … Course: … .. Batch: … … . Section: … … . Capable Name: … … Capable Code: … … Subject of assignment ( Project ) : … … … … … … Faculty Name: … … … … … … Date of entry of assignment: … … . Signature of Student… … … … … … … … … … … … Receipt Assignment Submission Form Enrollment No. : … … … … … … Name: … … … … … … Course: … .. Batch: … … . Section: … … . Capable Name: … … Capable Code: … … Subject of assignment ( Project ) : … … … … … … Faculty Name: … … … … … … Date of entry of assignment: … … . Signature of receiving system Stamp ( office ) Q ) . Why might an advertisement bureau utilize occupation bing for an advertisement run by Pepsi, whereas a bank uses process bing to find the cost of look intoing history backdown? Ans. An advertisement bureau uses occupation bing for an advertisement run for Pepsi because it is likely to be really specific to that single client. The chief purpose of J Ob costing is to place all the specif ninety-nine facets of each occupation. Whereas, P rocess costing can be used to calculate the cost of each look intoing history backdown. The procedure of look intoing history backdowns is similar for many clients. In Job Costing, costs areyassignedyto a batch or “ batch ” of a merchandise or s ervice while one n a procedure costingysystem, theycost of a productyor service is o btainedyby usingybroadyaverages to delegate costs toymasses of indistinguishable or similaryunits. The term occupation bing and procedure costing can be defined as: Occupation Costing: It involves the computation of costs involved in a building “ occupation ” or the fabrication of goods which is done in distinct batches. Procedure costing: It is an accounting methodological analysis that identifies and accumulates direct costs, and allocates indirect costs of a fabrication procedure. In a procedure bing system if we assume that all units receive the same sum of direct stuffs and transition costs. The unit costs can be averaged by spliting entire costs in a given accounting period by entire units manufactured. This attack is for illustration used by Bankss to calculate the unit costs of 100.000 similar client sedimentations made in a month. It is normally used by organisations with mass production of standard units and no uncomplete units after the period. In a Job-costing system the cost object is a unit or multiple units of a sepa rate merchandise or service called a occupation. Each occupation involves different sum of resources. The merchandise or service is frequently a individual unit, such as a fix occupation done at an Audi Service Center, or an advertisement run produced by Pepsi. An advertisement run for one client at Pepsi differs greatly from advertisement runs for other clients. Job Costing It involves the computation of costs involved in a building “ occupation ” or the fabrication of goods which is done in distinguishable batches. The costs areyassignedyto a batch of a merchandise or service and it identifies all the specif ninety-nine facets of a peculiar occupation. There are seven measure s in occupation costing: ( 1 ) Identify the occupation – The 1st measure in the occupation bing procedure is to place the range of the occupation. A fabricating company might place the order to be produce. A architectural house, may affect the design of a high-rise edifice. In order to execute a occupation accurately it is of import to cognize everything what the occupation entails. ( 2 ) I denti fy the direct costs of the job- This measure involves designation of direct costs which are associated with a occupation. If th vitamin E occupation is to fabricate 10,000 P epsi there are direct costs involved including the ingredients needed to do the P epsi. Other direct costs associated with a occupation are labour costs. It tells you how many employee hours will be needed to finish the occupation and multiply it by the mean hourly pay. ( 3 ) S elect the cost allotment bases to utilize for alloca tinkle indirect costs to the job- The undertaking will incur indirect costs with the direct costs associated with a occupation. Examples include the usage of equipment s in fabrication, the power to run a eq uipment, wages of supervisor or directors supervising the occupation, even the depreciation on machines used in the procedure of fabrication. Allocation base involves looking at old occupations and calculating the indirect costs totaled at the completion of the undertaking. ( 4 ) I dentify the indirect costs associated with each cost allotment base- The 4th measure after the allotment bases are defined & amp ; indirect costs are identified for the new undertaking. Using the Pepsi Manufacturing illustration, indirect costs might include the machine hours needed to do the units of Pepsi or the figure of supervisor hours to look over the industry of the Pepsi. ( 5 ) C ompute the rate per unit of each cost allotment base used to allo cate indirect costs to the job- The cost allotment bases in measure 3 are the entire indirect cost figures based on completed occupations or undertakings. Determine a individual unit rate by taking the entire cost figure and spliting it by the figure of individual units that were produced in the anterior undertaking. This individual unit rate will be used in the computation of indirect costs for the new undertaking. ( 6 ) C ompute the indirect costs allocated to the job- To find the entire indirect costs, the individual unit cost rate that was calculated in measure 5 is multiplied by the figure of units to be produced. It will supply the estimated entire indirect costs of all the costs being incurred. ( 7 ) C ompute the entire cost of the occupation by adding all direct and indirect costs assign ed to the job- The last measure in occupation bing procedure involves add ing direct costs to the indirect costs that have been calculated in order get the estimated cost for the entire undertaking. Then compare this figure with the figure given to the client to finish a occupation. The difference between the 2 figures gives either the net income or the loss for completion of a certain undertaking. Process bing Process costing is an accounting methodological analysis that hints and accumulates direct costs, and allocates indirect costs of a fabrication procedure. It can be used to calculate the cost of each look intoing history backdown. The procedure of look intoing history backdowns is similar for many clients. In a procedure costingysystem theycost of a productyor service is obtainedyby usingybroadyaverages to delegate costs toymasses of indistinguishable or similaryunits. Advantages of Process Costing The chief advantage of procedure costing is the easiness & A ; simpleness of accounting. Procedure Costing is a simple and direct method to determine cost which involves roll uping the ove rall costs from each section. It fundamentally ignores the costs related to the particular occupations within a section. This in bend reduces the volume of informations & A ; makes informations aggregation quick & A ; easy. This analysis does non necessitate any specialised accomplishments than normal accounting accomplishments. The utilizations of a procedure bing aid to set up a effectual control over the production procedure. It a llows budgeting of the end product and use costs as the criterion costs by doing it possible to track divergences from standard costs with easiness. It becomes possible to look at the inefficiency or disagreement in a specific procedure or section without look intoing each section or procedure. It f acilitates easy & A ; accurate trailing of stock list. Procedure bing makes it easy to obtain the mean cost of a merchandise leting accurate estimations to clients. Compared to other methods of bing such as activity based costing, p rocess costing is considered to be cheap & A ; make non run out the organisation ‘s resources and clip. Disadvantages of Process Costing Process costing is fundamentally for homogenous merchandises as it fails to supply an accurate estimation of merchandise costs when a individual procedure produces many points or different types of a same point. It remains suited merely for majority procedure works & A ; non for customized orders. Allotment of the joint costs to distinguish merchandises may take to irrational pricing determinations. While the procedure bing enables budgeting of criterion costs, the costs being obtained are historic & A ; non current and th eir usage for the determination devising remains limited. Procedure bing makes it easy to offer estimations as it deviates from the standard merchandise or leting options for value-added service. Process bing helps to fi ten criterion costs of production and accumulates all costs and reassign them to units as mean costs and raise the possibility of privacy of inefficiencies in a procedure. Procedure bing steps the effici ency of single procedures & A ; besides evaluates productiveness of an single worker hard. This reappraisal of the advantages and disadvantages of procedure bing indicates that procedure costing is a utile direction accounting tool for big companies such as Coca Cola that mass produce homogenous merchandises. Difference between Job bing and Process Costing: Footing Of Difference Job bing Process bing 1. Cost Calculation 1.Costs are computed for each occupation individually. 1. Costss are computed for each procedure over a period of clip i.e. production for a procedure during a given period. 2. Cost Unit 2. The cost unit in instance of occupation costing is “ a occupation ” . 2. The cost unit in instance of a procedure costing is “ a procedure ” . 3. Nature 3. Each occupation may be different. Production is non uninterrupted. 3. Each procedure for a entire end product is the same and by and large production is uninterrupted. 4. Supervision and Control 4. Greater supervising and control by the direction is required 4. Relatively less control is required since the work in procedures gets standardized. 5.Completion of occupation 5. Completion of occupation is necessary for calculation of cost of the occupation. Once the occupation is completed all costs are added to determine the entire cost of the occupation. 5. Completion of the occupation is non awaited. For accounting cost per unit is computed by spliting the entire cost bt procedure end product. 6.Specific orders 6. Job is executed against orders. 6. It is non necessary under procedure costing. Goods are for mass ingestion and hence they may be produced on a go oning footing.
