What is the Difference Between Job Costing and Batch Costing?
🆚 Go to Comparative Table 🆚Job costing and batch costing are two methods used to assign manufacturing costs to products. They differ in the nature of production, the cost unit, and the industries in which they are commonly used. Here are the main differences between the two methods:
- Nature of Production: Job costing is used when each product or job is unique, and the costs associated with each job are tracked separately. This method is commonly used in industries such as construction, custom manufacturing, and professional services. Batch costing, on the other hand, is used when products are produced in batches, where each batch has similar characteristics. This method is typically used when a company produces a limited number of products or when products have variations within a batch, such as in pharmaceuticals, food processing, and cosmetics.
- Cost Unit: In job costing, the cost unit is the executed job, whereas, in batch costing, the cost unit is a particular batch.
- Industries: Job costing is commonly used in industries where products or services are customized or unique to each customer or project. Batch costing is applied in industries where products are produced in distinct batches.
Both job costing and batch costing are types of specific order costing, which means that costs are traced to individual units of production rather than being averaged over a large number of units. Both methods require the identification of direct costs (such as materials and labor) and indirect costs (such as overhead) and involve the calculation of a cost per unit for each job or batch to determine the total cost.
Comparative Table: Job Costing vs Batch Costing
Job costing and batch costing are two methods used to assign manufacturing costs to products. Here is a table highlighting the differences between the two methods:
| Feature | Job Costing | Batch Costing |
|---|---|---|
| Definition | Job costing refers to a particular costing method, used while the production/work is finished in line with the necessities of customers. | Batch costing is a costing technique that can be used to assign production costs to groups or batches of identical products. |
| Production | Job costing is applied when the production is made as per the customer’s needs and preferences. | In large units or groups. |
| Calculation | Daily. | Weekly or monthly. |
| Main Advantage | Job costing includes its ability to track the profitability of individual jobs and to provide accurate cost estimates. | The main advantage of batch costing is that it allows companies to assign manufacturing costs to a group of similar products known as a batch. |
| Disadvantage | Job costing includes the potential for accounting errors and the need for extra record-keeping. | The main disadvantage of batch costing is that it can be expensive to set up and maintain, as companies need to track the manufacturing costs for each batch separately. |
| Cost Ascertainment | Cost is assigned on the completion of each unit or job. | Ascertained for the complete batch after the completion of the entire production process. |
Job costing is used when each product or job is unique and the costs associated with each job are traced to the specific job or product, making it suitable for industries such as construction, custom manufacturing, and professional services. On the other hand, batch costing is used when products are produced in batches, where each batch has similar characteristics, making it ideal for industries such as food and beverage, pharmaceutical, and chemical manufacturing.
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- Standard Costing vs Budgetary Control
- Absorption Costing vs Marginal Costing
- Price vs Cost
- Actual Cost vs Standard Cost
- Batch vs Continuous Culture
- Work vs Job
- Bookkeeping vs Accounting
- Variable vs Fixed Costs