Author of the Time & Attendance Consultant's Guide Series
Improvements in Time and Attendance Systems in recent years have seen the inclusion of Job Costing functionality.
Job costing and process costing are two different methods used by companies to calculate the cost of production.
Job costing is a method of costing where the costs are assigned to each job or product separately. This method is used by companies that produce unique or custom-made products or services, where each job or project has different requirements and costs.
For example, a construction company that builds custom homes would use job costing to calculate the cost of each home separately. The cost of labor, materials, and overhead are accumulated for each job, and the total cost is then divided by the number of units produced to arrive at the unit cost.
Process costing is a method of costing where the costs are assigned to each process or stage of production. This method is used by companies that produce identical or standardized products in large quantities.
The cost of each process or stage is calculated separately, and then the total cost is divided by the number of units produced to arrive at the unit cost.
For example, a cereal manufacturing company would use process costing to calculate the cost of producing each box of cereal. The cost of each process, such as milling, blending, and packaging, is accumulated and allocated to each unit produced. In summary, job costing is used for custom-made products or services, while process costing is used for standardized products produced in large quantities.
Advanced job costing allocates the true cost of labour to each job or process within a job. The true cost of labour is calculated not just on the hours worked on each job but the cost of labour at the applicable cost rates of normal time and any penalty rates and, of course at the specific labour cost that applies to each individual employee.
Job and process costing can provide valuable insights into production costs allowing management to make process improvements and reduce the cost of manufacturing. If you want more information regarding job and process costing, contact one of our time and attendance consultants on the details below.
Time & Attendance Consultant
1300 553 254