Difference Between Process Costing And Production Process

1.0 Production Processes On How The Product Or Service Is Made. A processing department is an organizational unit where work is performed on a product and where materials, labor, or overhead costs are added to the product. For example, a clothing might have several processing departments such as merchandising department, sampling department, fabric store department, trims and accessories store department, spreading and cutting department, sewing department, washing department, quality assurance department, finishing and packaging department, maintenance department, finance accounts department and HR or admin department. The departments in clothing manufacturing unit as below.

DEPARTMENT IN CLOTHING MANUFACTURING UNIT

FIGURE 1.0

However,

Job Costing ledgers, wherein such costs are recorded, form an integral part of the final account statement of the manufacturers. This type of costing involves recording the costs as per the specific jobs rather than a particular process.

However, Process Costing refers to the methodology involved in calculating the costs that are incurred while performing a particular task or undertaking a specific process. This might involve the costs that are either incurred directly or indirectly. Process Costing helps to keep a tight reign over the monthly expenditures in a manufacturing business. As an example, Job Costing involves the costs that form salaries of labors working in a particular process whereas Process Costing involves the costs of the processed or manufactured goods undertaken by different departments. Job Costing involves the costs of every individual unit of

Further more, assigning cost in process costing is that it allows managers to get detailed information on the production statistics of individual departments or workgroups and it is best suited for continuous manufacturing settings, such as factories and utility companies. The costing process help manager Process costing simplifies record keeping by relying on statistical calculations rather than actual inputs. As an example, consider a construction contractor using a job order costing system. The clothing factory has to keep track of all the cotton, needle, thread and other materials used on the job, as well as tracking workers ' lunch breaks and hours worked. Finally process costing gives managers the advantage of being able to ascertain the same qualities in entire departments and compare performance over time. As a local manufacturing company Mr. Hazeem can either between both costing process it depend on process producing