Question

Which of the following differentiates job order costing from process costing?

A: Process costing deals with unique products produced on large scale while job costing is used when each unit of output is identical and not produced in batches.

B: Process costing is used by service industries, and job costing is used by manufacturing industries.

C: Process costing is used when each unit of output is identical, and job costing deals with unique products not produced in batches.

D: Process costing deals with unique products and job costing is used when each unit of output is identical.

Answer 1

C:  Process costing is used when each unit of output is identical, and job costing deals with unique products not produced in batches.

Process Costing is used when there is large scale production of identical products that are required to be processed from one stage to another and finally the output is produced. Example: Manufacturing companies such as oil, petroleum products, etc. While Job costing is used when the requirement of each client of the company is different and needs to be customised hence each is assigned a unique job by using job costing. Example: Catering Services, Accounting Services, Consulting, etc.

Hence Option B is incorrect because Process Costing is used by Manufacturing Industries and Job Costing is used by Service Industries.

Options A and D are incorrect because Process Costing deals with identical products and job costing deals where each unit of output is unique.