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Difference Between Job Costing and Batch Costing

Many costs are incurred in the process of business operations. The costs of producing any service or product in an organization must be ascertained for smooth business operations, a technique referred to as Costing. This entails recording expenses to each process or product, classifying expenses and allocating overheads and direct expenses to each product for the purpose of determining the cost per unit of the production of a product or process. Various techniques are used to measure the cost of a process or product, including job costing and batch costing.

 

What is Job Costing?

This is a costing technique used to determine the cost of a job which can be a contract, specific work or assignment that should be performed in accordance with customers’ set specifications and requirements. 

It involves the consideration of:

  • Direct materials- It accounts for costs incurred by assigning costs to a project or product
  • Direct labor- Specific time spent on jobs is assigned to the jobs based on labor costs
  • Overheads- Overhead costs are accumulated and allocated to jobs done

Job costing is helpful in:

  • Tracing specific costs in jobs done and determining if the costs can be reduced in future jobs
  • Determining any excess costs incurred and billing to them the customer

It is best suited for industries which manufacture products as per customers’ demands and needs such as shipbuilding, decoration, interior design, furniture, and press printing, just to name a few.   

 

What is Batch Costing?

This is a costing technique involving identical units that are produced in batches whereby each batch is assigned a batch number, number of units and the unit costs. The cost for an individual item can hence be derived by dividing the sum cost of the batch by the number of items in the batch. A profit markup is then added to the cost of the batch.

Batch costing technique is best suited for industries which manufacture products in batches such as clothing manufacturers, engineering manufacturers as well as fast-moving consumer goods industries.

 

Similarities between Job Costing and Batch Costing

  • Both are used to ascertain operation costs in businesses

 

Difference between Job Costing and Batch Costing

Definition

Job costing refers to a costing method used to determine the cost of a job which can be a contract, specific work or assignment that should be performed in accordance with customers’ set specifications and requirements.  On the other hand, batch costing refers to a costing technique involving identical units that are produced in batches whereby each batch is assigned a batch number, number of units and the unit costs.

Ideal Industries

While job costing is best suited for industries which manufacture products as per customers’ demands and needs such as shipbuilding, decoration, interior design, furniture and press printing, batch costing is best suited for industries which manufacture products in batches such as clothing manufacturers, engineering manufacturers as well as fast-moving consumer goods industries.

Terms of production

While job costing accounts for goods manufactured as per customers specifications, batch costing accounts for mass production goods.

Cost unit

While the cost unit in job costing is the executed job, the cost unit in batch costing is a particular batch.

Cost derivation

In job costing, the cost of each unit is derived after the completion of each job. On the other hand, in batch costing, the cost per unit is derived by dividing the total cost of the batch buy the number of items in the batch.

Job Costing vs. Batch Costing: Comparison Table

 

Summary of Job Costing vs. Batch Costing

Although both job costing and batch costing aim at the effective allocation of productions costs, job costing refers to a costing technique used to determine the cost of a job which can be a contract, specific work or assignment that should be performed in accordance with customers’ set specifications and requirements. It is best suited for industries which manufacture products as per customers’ demands and needs such as shipbuilding, decoration, interior design, furniture, and press printing. On the other hand, batch costing refers to a costing technique involving identical units that are produced in batches whereby each batch is assigned a batch number, number of units and the unit costs, and is best suited for industries which manufacture products in batches such as clothing manufacturers, engineering manufacturers as well as fast-moving consumer goods industries.

 

Tabitha Njogu

Tabitha graduated from Jomo Kenyatta University of Agriculture and Technology with a Bachelor’s Degree in Commerce, whereby she specialized in Finance. She has had the pleasure of working with various organizations and garnered expertise in business management, business administration, accounting, finance operations, and digital marketing.

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References :


[0]Terence Lucey. Costing. Cengage Learning EMEA Publishers, 2002. https://books.google.co.ke/books?id=TNDfwPw7mlMC&pg=PA187&dq=Difference+between+Job+Costing+and+Batch+Costing&hl=en&sa=X&ved=0ahUKEwicnfaksK_jAhViQEEAHe6jBtoQ6AEILjAB#v=onepage&q=Difference%20between%20Job%20Costing%20and%20Batch%20Costing&f=false

[1]Karunakar Patra. Accounting and Finance for Managers. Sarup & Sons Publishers, 2006. https://books.google.co.ke/books?id=-Veoral4SOoC&pg=PA105&dq=Difference+between+Job+Costing+and+Batch+Costing&hl=en&sa=X&ved=0ahUKEwicnfaksK_jAhViQEEAHe6jBtoQ6AEINDAC#v=onepage&q=Difference%20between%20Job%20Costing%20and%20Batch%20Costing&f=false

[2]N. Ghosh. MANAGEMENT CONTROL SYSTEMS. PHI Learning Pvt. Ltd., 2005. https://books.google.co.ke/books?id=mLk11itaLrIC&pg=PA159&dq=Difference+between+Job+Costing+and+Batch+Costing&hl=en&sa=X&ved=0ahUKEwicnfaksK_jAhViQEEAHe6jBtoQ6AEIQzAF#v=onepage&q=Difference%20between%20Job%20Costing%20and%20Batch%20Costing&f=false

[3]Image credit: https://www.publicdomainpictures.net/cs/view-image.php?image=31367&picture=business-finance

[4]Image credit: https://www.needpix.com/photo/1230216/grow-your-money-business-finance

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