Job and Batch costing

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Job costing is used in Industries where the production is as per the requirements of the customer. Each order is customized as per customer’s requirement and is known as Job. 
The main feature of these organizations is that they produce according to the requirements and specifications of the consumers. 
The following are the features of job costing are
It is a specific order costing
A job is carried out to meet the specific requirements of the order as every order is unique.
Job costing helps business to calculate the cost of a job on the basis of which quotation for the job is given.
While computing the Job cost, direct costs are charged to the job directly as they are traceable to the job.

Advantages of Job Costing: The following are the advantages of job costing.
Correct information is available about the cost of the job and the profits generated from the it.
Proper records are maintained for the material, labor and overheads so that a costing system can be built up
Useful cost information is generated which helps management for proper control and analysis.

Batch costing is used where product manufactured in batches and used in the assembly of the final product. Parts of products like TV, radio, AC and other consumer goods are manufactured in batches to maintain uniformity in all respects. It is not possible to manufacture as per the requirements of customers and hence rather than manufacturing a single unit, several units of the component are manufactured. 

Batch Size: One of the important aspects of batch type production is to decide the batch size. Actually the determination of appropriate batch size of the production has conflicting views.

 Economic Batch Quantity = √2AS/C 
     Where A = Annual requirements of the product
    S = Setting up cost per batch
    C = Carrying cost per unit of inventory per annum.

  • In Job Costing Job is carried out or a product is produced by specific orders while in Batch Costing process of producing the product has a continuous flow and the product produced is homogeneous.
  • In Job Costing Job Costs are determined for each job, In Batch Costing, Costs are compiled on time basis i.e., for production of a given accounting period for each process or department
  • In Job Costing each job is separate and independent of other jobs. In Batch Costing, Products lose their individual identity as they are manufactured in a continuous flow

These online MCQ tests and MCQ questions includes all main concepts of the chapter (Job and Batch costing) in CS Executive Module I Cost and Management Accounting (MCQ based OMR) Exam

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