WRITTEN ASSIGNMENT UNIT 2
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Written Assignment Unit 2
Aksamal Akhmetova
University of the People
WRITTEN ASSIGNMENT UNIT 2
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Costing is an important management tool and the better the costing system, the more efficiently
we can manage the business. Therefore, it is important that all managers have good practical
knowledge of the various methods of costing, be able to effectively use the chosen system, and
also give recommendations for its improvement (Heisinger, K., & Hoyle, B. (n.d.) . Depending
on the industry affiliation of the applied production technology, the performed works and the
rendered services at the enterprises we should apply certain methods of costing:
1. Job Order Costing is a cost accounting method in which costs are accumulated for
individual orders (jobs). An order (work) may be the production of a product or service,
for example, repair of a car or treating a patient in a hospital. Cost is ascertained
separately for each job (Horngren, T., 2011). It is best suited to be used for: furniture
making, construction, architecture and painting.
2. Process Costing is ascertaining the cost at each stage of manufacturing. It is a method of
accumulating direct cost and allocating indirect cost in manufacturing process. When
standardized identical products is produced and passing through many processes, process
costing is used. It is best suited to be used for: paint manufacturing, petroleum products,
cool drinks, beverages.
3. ABC Costing identifies activities in a unit and allocate cost to the activities based on the
actual consumption. ABC costing is used to assign the cost to the products. Cost drivers
are identified in ABC costing (Needles, Belverd E.; Powers, Marian., 2013). It is best
suited to be used for: home builders, where overhead cost is more and activities are
more.
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Compare and contrast:
Differences
Job Costing
Process Costing
ABC Costing
Based on Customer
Based on Continuity
Based on the Activities
Order
of process
Involved
Low production
High production
High or low production
volume
volume
volume
Heterogeneous
Homogeneous
Both type of products
products
products
Job cost sheet is used
Production cost
report is used
Unit cost computed
Unit cost computed
Unit cost computed by
by Job
by Department
Activitity
Cost transferred when Cost transferred when
each job is completed
each accounting
period is ended
Benefits
Suitable for Cost plus
Average cost can be
Accurate Cost
contracts
easily determined
Calculation
Actual cost and
Allocation of
Correct decision
Budgeted Cost are
expenses is easily
making
compared
made
Budgetary Control
Standard Costing is
Exact profit can be
System is followed
followed
known
WRITTEN ASSIGNMENT UNIT 2
Limitations
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Job Costing is
Average Cost is used
Identification of
expensive
to value the products
Activities is more work
involved
No standardization in
This cost may not be
Very costly to
Job Costing
suitable for all
implement
purposes
More manual work is
Can’t provide
More technical work is
involved
accurate estimate
required.
when there is single
process and many
products
Costing method useful for Well Suit World:
Following are the points to be considered: material is the same for all the suits, all suits undergo
same production and all suits undergo same quality inspection process. By the above
observation, Process Costing is suitable to Well Suit World.
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References

Heisinger, K., & Hoyle, J. B. (n.d.). Accounting for Managers.
Retrieved from https://2012books.lardbucket.org/books/accounting-formanagers/index.html[KM1]

Horngren, C. T. (2011). Cost accounting. Hong Kong: Pearson.
 Needles, Belverd E.; Powers, Marian (2013). Principles of Financial Accounting.
Financial Accounting Series (12 ed.). Cengage Learning