## Job Costing: Merits, Limitations, and Comparison with Process Costing

### Advantages of Job Costing

1. Detailed cost control — material, labour, and overheads tracked per job

2. Profitability of each job can be independently determined

3. Facilitates production planning

4. Compatible with Budgetary Control and Standard Costing

5. Spoilage and defects are traceable to specific jobs; responsibility can be fixed

### Disadvantages of Job Costing

1. Laborious and costly to administer

2. Heavy clerical work → higher probability of errors

3. Not suitable in inflationary conditions — fluctuating costs make comparison unreliable

4. Past cost records lose relevance if market conditions or cost structures change

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### Job Costing vs Process Costing — Side-by-Side

Dimension	Job Costing	Process Costing
Nature of production	Specific/custom orders	Continuous, homogeneous flow
Cost accumulation	Per job / work order	Per process / department per time period
Product identity	Each job retains identity	Products lose identity in the flow
Unit cost basis	Specific to each job	Average for the period
When cost is calculated	On job completion	At end of cost period
Formula	Total costs on job card	Total period cost ÷ Output units
Managerial attention	High (each job may differ)	Lower (standardised process)

Memory aid: Job = Just for you (custom). Process = Production never pauses (continuous).

Worked example

### Example 1

Choosing the Right System:

Scenario A: A printing press receives an order for 1,000 customised wedding invitations with a unique design. → Job Costing — each order is distinct, costs collected per work order number.

Scenario B: A paint manufacturer produces red paint in 100-litre batches continuously; all output is identical. → Process Costing — costs accumulated per month per process, then averaged over output litres.

Scenario C: A law firm bills clients for hours worked on each client's case. → Job Costing — each client matter is a separate 'job'.

⚠️ Common exam mistakes

Applying process costing to custom-order manufacturing — process costing only works when all output units are homogeneous.
Computing job cost before the job is complete in job costing — cost is determined only upon completion; WIP is tracked but final cost is not yet known.
Assuming process costing gives exact unit costs — it gives average unit costs for the period, not precise individual unit costs.
Ignoring inflationary distortion in job costing — if significant time passes between similar jobs, historic job cost data may be misleading for future pricing.

Reference:

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Advantages, Disadvantages, and Comparison with Process Costing

Worked example

⚠️ Common exam mistakes