Acc 561 Week 4 Discussion

What are the main differences between job, process, and activity-based costing Job, process, and activity-based costing are all methods of allocating overhead cost to a product. Job order costing involves allocating costs to each product. Overheads are allocated to each unit in by dividing the total overhead cost with the number of units produced. This method is normally used for customized products. Process costing allocates overheads using the processes that are used to make the product. Overheads allocated to the production processes and thereafter spread to the number of units produced in each process. Activity-based costing allocates overheads using the sum total of the cost of activities undertaken to produce each unit (McLaney Atrill, 2002). Reference McLaney, E. J., Atrill, P. (2002). Management accounting for non-specialists. London Prentice Hall. Give an example for each costing method Example of job costing is where a carpenter charges a client for a custom-made dining table by calculating the cost of wood, labour, proportion of rent, machine time etc. for the individual item. An example of process costing is where the same carpenter allocates costs according to the processes of making the table such as wood planning, Joinery, finishing and polishing. An example of