Job Costing and Batch Costing Methods

Job Costing and Batch Costing Methods There are various types of business in the world now. Each and every business has to choose a particular method to ascertaining the costs are available in the business. Simply costing methods is a method of collecting cost. As in the diagram 1.1 costing methods are drifting apart. Specific Order Costing is the basic costing method. This method is suitable to those businesses where the work consists of separately identifiable of contracts, jobs or batches. 1.2 Definition Job Costing Method This is one of the methods that we analyze the cost of the job. If we identify the word job in here we can say that it as a small work or group of small activities in any production. This system considers job as a cost unit which contains a sole order, individual project or contract. This is an isolation of the entire time, material and costs to a sole order or job. This cause for gathering and covering on the expenses and income connect with particular projects or job. Some customers will not order the all product, but they will just order for getting required job. Hence it is essential to discover out that job orders expenditure throughout this method. Batch Costing method This is a modified type of job costing. Batch costing method is using by companies whose products are simply recognized by batches. In here batch of identifiable products are concerned as a sole job among unit price. Simply this is a method whereby recognize units produced are concerned as a sole unit and the amount of expenditure is allocated to the entire of that batch as an alternative of each unit. This used in ready-made garments, factories, industries, etc. Similarities Actually they are lot of similarities between job costing and batch costing because batch costing is a modified form of job costing. The costing method means the system they are following to count the cost in batch costing is similar to the job costing apart from a one point of difference. Because in here batch has been set in as the cost unit as a replacement of a job. Simply the both are using the equal expenditure build up system. From both methods we can ascertain costs which business needs. The both systems are dealing with holding within a contract cost by book keeping method. Both Methods are makes use of appraised expenditure data as the base for necessary order price quotations. Differences The main difference is the way how the business is operated. Think like some company is setting up costing for general supplier. For this in job costing the business is operated one job at a time thus it creates more sense rather than batch costing. Batch costing would use various goods to be sold to a number of distributors by using a producing facility. In job order costing each manufactured goods is manufactured according to job requirement, for the customer demand. But in batch costing it is a mass production. When we talking about the production requirements they also act in different ways. In job costing production requirement for each production is matchless and unique. But in batch costing every one of units has similar common features for the production requirements. And there is a differentiation about the measure of output. In job costing as it name seems it is used for a job (sole) but in batch costing transacts with a measure of identical manufactured production units. In job costing the entire expenditure calculated are concerned as the expenditure of sole unit. For batch costing, they divided the entire expenditure from the quantity of products unites have produced. In job costing it covers up all fixed and changeable expenditures for producing a batch but in job costing they include by keeping an account of direct costs and indirect costs. In job costing perform job is treated as a cost unit however under the batch costing a collection of equal units which contains in the batch can be treated as a cost unit. Job costing is using by Furniture making, printing etc but batch costing is using by garments and drug industries. In batch costing they using a divide cost sheet means separate sheets for each batch by numbering but in job costing each job is treated as a sole job work. Examples Job costing Such as hardware, ship-building, engineering industries are using this method. Example No- 01 Tom and Jerry Engineering Company has accomplished all the works in hand on 28th November 2011 which they absorbed on job work. But it was apart from job no. 112. Direct material of $ 50,000 and direct labour cost of $ 40,000 was showed in the cost sheet on 28th November 2011 individually as having being carried on job no. 112. Until 28th November 2011, the cost was carried by the business. As following it was the accounting year for the last date. It is using by the industries which manufactures products as batches. Ready-made garments, drug industries and some of the companies which are producing electronic parts of computer and etc are using this method as their costing system. Example No- 01 As to the records of Lion King ready-made garment, one customer orders 300 unites of batch. Following details are for 100 units. Calculate selling price for 300 unites. Time-Rate Method and Piece-Rate Method 2.1 Definitions Remuneration means motivating people by giving a financial reward to them gain for their work. Simply we can say it is the types of the wages plans. It is an agreement between labours and employers in an organization. Hence it is more important section in an organization. There are two categories in here: Time Rate Plan This is a simplest and of course the oldest type of wages plans. In here the wages are paid on the basis on time which a single worker corporate to complete the producing a single article. Simply we can say in time rate plan is employers are salaried for the total time they have spend at employment work. This can be calculating in man hours or man minutes or else on daily weekly or monthly. The following formula is using to calculate this method. Gross Payment = the total time worked ÃÆ'- Rate per the time (Hours/ Minutes) (Per hour/ per minute) Piece Rate Plan This is also identified as piece work, performance related pay. This is depending on the total quantity of the outputs which the employer has produced. In here the worker means employer is paid a fixed payment for every single unit of production regardless of the time. Simply we can say it pays for the result thus people say this as payment by result system. From this method business can have a better output and also they can make sure that employees are salaried for the sum of work they do. The following formula is used for this method. Straight Unit Work = Quantity of good units ÃÆ'- Rate for a single Produced Piece 2.2 Similarities The both systems are simple to understand and it is easy to calculate also. Hence we can say both systems are simplicity methods. And also the both methods are economical. Both methods are preferred and accepted by deal unions. Both ways workers are having a financial statement thus worker is fulfilled. After having the financial reward they automatically become motivated by both systems. 2.3 Differences First of all we can say both having different meanings. As I mentioned earlier time rate is a system based on time which workers work and piece rate is a method base on the products which workers create. In piece rate system it pays the worker following to the quantity of good products which they have produce regardless of time. But in time rate it pays the workers following for the time that they have spent to product the outputs. Time rate plan provide an accentuation on huge amount of outputs nevertheless piece rate plan accentuation on quality of output. Through piece rate system it discrimination the employer and pays extra gross wage to skilled workers. But in time rate it pays both skilled and unskilled workers same wages. Piece rate system need a strike supervisor to check the quality of the out puts but time rate system does not need it. Hence for piece rate plan business need to cost a extra amount for maintenance. When we talking about the ascertainment of labour cost, in piece rate plan it supports o fix per piece labour cost in advance but time rate plan does not support for this.