Businesses use different costing methods to value their products. In this article, we are going to highlight the similarities and differences between batch costing and process costing.
Similarities between batch costing and process costing
- Batch costing is used to allocate expenditures such as material, labour and overheads (production and non-production) to a batch of units from which cost per unit can be ascertained. Process costing also allocates expenditures such as material, labour and overheads (production and non-production overheads) to the number of units produced in a particular process from which cost per unit is calculated.
- Inventory accounts such as the material account, labour account and overheads account are used to record accounting entries of production.
- Both costing methods use the cost per unit to make decisions regarding the production process and whether to continue the production.
- The aim of both costing methods is to calculate the cost per unit which is to be used for setting a selling price and for cost control purposes.
- In both systems, the flow of expenses through the manufacturing accounts is essentially the same.