Question

What are the main differences between job, process, and activity-based costing?

Answer 1

Job costing is about determining the cost of a particular job thus, this is generally done for single job. Process costing on the other hand is merely about calculation of costs associated with a particular process which is an essential part of production. Activity based costing is completely different as it is about finding the correct cost pool and associated cost drivers to attach costs with cost pools. Job cost is relevant for individual contracts and especially work contracts whereas process costing is generally used in factories that produce products which need number of processing before completion. However, for activity base costing management must identify the cost pool and cost drivers to apportion the overheads correctly.