Perfect — here’s the updated and complete notes, now including the point that batch
costing is recorded using Batch Cost Records.
📘 COSTING METHODS — JOB COSTING
TO PROCESS COSTING
1. JOB COSTING
🔹 Meaning
Job costing is a costing method used when products or services are made to specific
customer orders.
Each job is treated as a separate unit of cost accumulation.
🔹 Industries Using Job Costing
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•
•
•
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Printing press
Tailoring and custom clothing
Interior designing
Repair workshops
Specialized manufacturing
🔹 Features
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Every job is unique and customized.
Separate job cost card (or sheet) maintained for each job.
Costs are accumulated by individual jobs, not by time period.
Helps determine profit or loss per job.
🔹 Components of Job Costing
1️⃣ Direct Materials
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Materials traceable to a specific job.
Materials requisitioned from the store and recorded in the Job Cost Card.
2️⃣ Direct Labour
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Labour hours spent on each job recorded via Job Cards or Time Sheets.
Labour cost = Hours × Rate per hour.
Recorded in the job cost card.
3️⃣ Direct Expenses
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Any specific expense incurred for a job (e.g., hiring special equipment).
Directly charged to the job.
4️⃣ Production Overheads
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Indirect costs (e.g., power, rent, supervision).
Allocated using a base such as:
o Direct labour hours
o Machine hours
o Direct labour cost
🔹 Formula for Job Cost
[
\text{Total Job Cost} = \text{Direct Materials} + \text{Direct Labour} + \text{Direct Expenses}
+ \text{Production Overheads}
]
🔹 Advantages
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Helps determine accurate job costs.
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Useful for pricing and quotation.
Helps in cost control and efficiency analysis.
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Profitability can be measured job-wise.
format
Particulars
Amount (₹)
A. Direct Costs
1. Direct Material
2. Direct Labour
3. Direct Expenses
→ Prime Cost (1 + 2 + 3)
xxx
xxx
xxx
xxx
B. Factory / Production Overheads
→ Factory / Production Cost (Prime Cost + Production Overheads)
xxx
xxx
C. Administrative & Selling Overheads (Non-Production
Overheads)
→ Total Cost (Production Cost + Non-Production Overheads)
D. Add: Profit
→ Selling price (Total Cost + Profit)
xxx
xxx
xxx
xxx
2. BATCH COSTING
🔹 Meaning
Batch costing is used when identical items are produced in batches rather than
individually.
Each batch is treated as one job for costing purposes.
🔹 Industries Using Batch Costing
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Footwear manufacturing
Pharmaceuticals
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Spare parts manufacturing
Ready-made garments
🔹 Recording System
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Batch Cost Records are maintained to record and accumulate all costs related to a
particular batch.
Each batch cost record includes details of:
o Direct materials
o Direct labour
o Direct expenses
o Overheads applied to the batch
🔹 Formula for Cost Per Unit
Cost per unit=Total Batch Cost\number of Units in the Batch
🔹 Features
•
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Similar items are grouped into batches.
Cost is accumulated for each batch using Batch Cost Records.
Helps in economies of scale through bulk production.
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Simplifies costing for standardized products with minor variations.
Format:
Particulars
Amount (₹)
A. Direct Costs
1. Direct Material
2. Direct Labour
3. Direct Expenses
→ Prime Cost (1 + 2 + 3)
xxx
xxx
xxx
xxx
B. Factory / Production Overheads
xxx
→ Factory / Production Cost (Prime Cost + Production Overheads)
C. Administrative & Selling Overheads (Non-Production
Overheads)
→ Total Cost (Production Cost + Non-Production Overheads)
D. Add: Profit
→ Sales Revenue (Total Cost + Profit)
xxx
xxx
xxx
xxx
xxx
3. PROCESS COSTING
🔹 Meaning
Process costing is used when production is continuous and products are identical as
they pass through different stages (processes or departments).
Costs are accumulated for each process for a given period.
🔹 Industries Using Process Costing
•
Oil refining
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Chemical production
Food and beverage (e.g., juice, dairy)
Textile mills
Cement manufacturing
🔹 Features
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Continuous production flow.
Each process or department has its own account.
Costs are transferred from one process to the next.
•
The output of one process becomes the input for the next.
process cost is average
cost based on equvilent units
🔹 Elements of Process Cost
1. Direct Material – Added at various stages.
2. Direct Labour – Labour cost specific to each process.
3. Production Overheads – Distributed to each process.
🔹 Formula for Unit Cost
[
\text{Cost per Unit} = \frac{\text{Total Process Cost}}{\text{Total Units Produced}}
]
4. LOSSES AND GAINS IN PROCESS COSTING
🔹 Normal Loss
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Expected loss due to evaporation, spoilage, etc.
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Unavoidable and included in cost of good units.
Scrap (if any) value is deducted from total process cost.
🔹 Abnormal Loss
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Unexpected loss (e.g., due to machine breakdown, accident).
Treated separately in the costing records.
Not included in normal process cost.
🔹 Abnormal Gain
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Occurs when actual loss is less than expected.
Recorded separately as a gain.
1. Expected Loss
🔹
🔹
🔹
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Expected Loss (units)=Certain Percentage×Input Units
2. Expected Output
Expected Output (units)=Input Units−Expected Loss (units)
3. Cost per Unit
Cost per Unit=total cost/total units
4. Total Cost
Total Cost=Material Cost+Labour Cost+Overheads
5. Conversion Cost
Conversion Cost=Labour Cost+Overheads
🔹
Equivalent Units (of Production)
Meaning
🔹
Equivalent units represent the number of complete units that could have been produced given the amount of work actually done on
partially completed units during a period.
Formula for Equivalent Units Equivalent Units
=Equivalent Units=Completed Units+(Closing WIP Units×Percentage of Completion)
5. COMPARISON TABLE
Basis
Nature of
Production
Cost Unit
Record Type
Output
Uniformity
Job Costing
Customized, specific
orders
Each job
Job Cost Sheet
Batch Costing
Similar items in
batches
Each batch
Batch Cost Record
Process Costing
Continuous, identical
production
Each process
Process Account
Different for each job
Same within batch
Identical across production
Cost Transfer
No transfer
After batch
completion
From one process to next
Examples
Furniture, printing,
tailoring
Medicine, garments
Oil, juice, cement
✅ SUMMARY
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Job Costing → Customized work, tracked individually.
Batch Costing → Similar products produced in groups and recorded using Batch
Cost Records.
Process Costing → Continuous, mass production through stages.
Overheads and losses handled differently under each system.
Each method suits different industries and production types.