Question

What are the major differences between job-order costing and process costing systems? Give an example of a well-known company that might use job-order costing and an example of a well-known company that might use process costing. Explain why you have chosen the companies that you did, specifically why job order costing or process costing are used. Do not choose companies that your classmates have already commented upon. Participate in follow-up discussion by critiquing your classmates' choices of companies. Please include proper citations in your discussion post. Points will be deducted if proper citations are not used.

Need Originial Answer and Sources

Answer 1

Major differences between job-order costing and process costing systems:

1. Job costing is applicable to customized jobs ( e.g clothing and furniture manufacturers, law firms, consulting firms, film studios etc) in situations where the objective is to identify costs with specific products or jobs. Each customer is treated as a separate job or cost center. Process costing on the other hand is used in case of mass production of homogeneous units that continuously pass through different departments or processes.
2. In job costing, costs are accumulated for particular jobs using job cost sheets. In process costing, manufacturing costs are accumulated for the entire department or process.
3. In job costing, production is generally dependent of customers' orders and specifications. Under process costing, production is done for stocking goods for future sale.
4. In job costing, unit cost is obtained by dividing the cost of the job order by units produced in the job order. Under process costing, unit costs are obtained by dividing departmental/ process costs by process production, and the averaging process applies.
5. In job costing, one WIP account is maintained for each job. In process costing, WIP accounts are prepared for each production / process department.

Company using job costing : Deloitte Consulting, 20th Century Fox

Company using process costing : Toys-R-Us, Nestle's S. A.