Question

Difference between process costing and contract costing

Answer 1

Answer:

Job costing and contract costing are two popular methods of specific order costing that are important for businesses that provide a customized product. However, there are a number of differences between the two that should be clearly understood in order to distinguish them from one another. The key difference between job costing and contract costing is that job costing is a system used for completion of specific customer orders where each unit produced is considered a job whereas contract costing is referred to as a costing system applied where work is undertaken according to special requirements of customers in a location specified by the customer.

CONTENTS

1. Overview and Key Difference

2. What is Job Costing

3. What is Contract Costing

4. Side by Side Comparison – Job Costing vs Contract Costing

5. Summary

What is Job Costing?

Job costing is a system used for completion of specific customer orders where each unit produced is considered a job. When the products are unique in nature, the cost of producing two different products cannot be compared effectively since the amounts of materials, labor and overheads vary from one job to another. Each job will be assigned a unique identifier and a ‘job cost sheet’ will be used to record all job-related information.

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Answer 2

Difference between process costing and contract costing

Explanation:

1. Job costing or contract costing is a method where cost of customized contract is calculated where as in case of process costing the cost of every project having different stages is calculated.
2. Job costing calculates cost based on each batch of product while in case of process costing cost of each process which is needed to complete the product is calculated.
3. job cost is generally preferred by service based companies while process costing is generally preferred to calculate cost of the product.
4. job cost where different batch of good and and services are different or customized while process costing is preferred where each batch of good is identical.

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Difference between process costing and contract costing

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