Question

Distinguish between job costing and contract costing.

Hint:

Job costing for small orders in factory; contract costing for big outdoor projects.

Answer 1

Job costing and contract costing are both methods used to ascertain the cost of specific work orders, but they differ in several ways.
Job Costing:
1. Job costing is used when production is carried out according to specific customer orders.
2. The work is usually done inside the factory premises.
3. Jobs are small in size and shorter in duration.
4. Each job is treated as a separate cost unit and costs are collected for each individual job.
5. Examples include printing, repair jobs, or manufacturing customized parts.
Contract Costing:
1. Contract costing is used for large-scale, long-duration work carried out at the contract site.
2. The work is generally performed outside the contractor’s premises.
3. Contracts are bigger in size and may last several months or years.
4. Costs are collected for each contract and payments may be made in installments based on work certified.
5. Examples include construction of buildings, roads, bridges, or shipbuilding.
Thus, the main difference is the scale, duration, and location of the work involved.