Job costing or process costing — how do you pick the right method for costing your business?
My work is all custom projects for individual clients, while a colleague runs a continuous production line making the same item — why shouldn't we both use the same costing method?
Job costing fits work where every engagement is different from the last — contracting, consulting, made-to-order manufacturing — tracking material, labour, and overhead separately for each project so you know the actual margin on that specific contract.
Process costing fits continuous, identical production — a factory turning out the same item by the thousand every day — where cost is accumulated for the whole process or period and then spread across the units produced, rather than tracked unit by unit. Use the wrong method and you'll either price an individual project at a loss or lose the real picture of what your production line actually costs — usually the first thing RASEEKH checks with clients in contracting and manufacturing.