If so, more value product is main product and less value product is by-product. The balance in this account at any time represents the cost of jobs not yet completed. This introduces subjective element in scientific cost determination.
The method of application of process costing will therefore be the method most suited to the situation and needs of the enterprise.
The production is intermittent and not continuous. To determine the unit cost. It is prepared with sufficient copies so that a copy of the same may be given to all the departmental managers or for man who are required to take any part in the production.
It means that goods are produced and maintained as stock.
For this purpose, it is necessary to rely upon cost data supplied by Cost Accountants. All costs relating to a process are charged to a separate account and then averaged out to determine the cost per unit. Assisting management in decision making Decision making is defined as a process of selecting a course of action out of two or more alternative courses.
A main product of one firm may be a by-product of another firm. Job order costing is that form of specific order costing which applies where the work is undertaken as an identifiable unit such as: Cost saving could be a temporary affair and may be at the cost of quality.
The prospective customer is informed with the estimate of the job. Labour cost on the basis of time clocked in respect of the job with the help of time tickets and factory overheads are added to these cost components according to some rational methods of overhead absorption.
Management can easily and accurately determine and quote prices of jobs of a similar nature which are in prospect. It may be adopted in organizations producing a single commodity in bulk, or a group of products of different types.
It suffers from certain limitations. Ascertaining the profit of each activity The profit of any activity can be ascertained by matching cost with the revenue of that activity.PROCESS COSTING Job Costing Job costing is the process of tracking the expenses incurred on a job against the revenue produced by that job Job costing is an important tool for those who are pairing a relatively high dollar volume per customer with a relatively low number of customers.
For example, building contractors, subcontractors, architects. Job costing is a method of cost accounting whereby cost is compiled for a specific quantity of product, equipment, repair or other service that moves through the production process as a continuously identifiable unit, applicable material, direct labour, direct expenses and usually a calculated portion of overheads being charged to a job order.
Process Costing – Principles, Features, Objectives, Application According to Harold Bieman Jr. and Thomas R.
Dyckman, The process cost system makes no attempt to account for the goods of individual items or specific groups of items. According to Dr. P.C. Tulsian in his book Introduction to cost accounting, main objectives of cost accounting are as under.
To ascertain cost: The basic objective of cost accounting is to ascertain cost of cost center. Cost ascertainment is the process of determining costs after they have been incurred.
Basically there are two methods of cost ascertainment -. Job costing is usually a method of costing applied in industries, where the cost of the production is usually measured by the number of completed jobs.
This is usually taken as a factor to measure the feasibility of jobs. These costs are recorded on a ledger throughout the whole job process and are. Job costing is a method of cost accounting whereby cost is compiled for a specific quantity of product, equipment, repair or other service that moves through the production process as a continuously identifiable unit, applicable material, direct labour, direct expenses and usually a calculated portion of overheads being charged to a job order.Download