Question

Describe the differences between job order costing and process costing systems. Identify elements of manufacturing cost in each system.

Answer 1

1)	In Job order costing system [JCS] the jobs are the cost objects, whereas
	in Process costing system [PCS] it is the various processes that are the
	cost objects.
2)	In JCS costs are accumulated against a Job till it is completed.
	In PCS costs are accumulated against processes for a specified period.
3)	JCS is suitable where products or services are produced to the specifications
	of the customer, whereas PCS is used for standardized products that are
	produced to stock before sale.
4)	In JCS, WIP may or may not be present at the end of the year; But in PCS, WIP
	will always be present at the end of the period.
5)	In JCS, losses are not segregated into normal/abnormal losses, whereas in
	PCS, losses are segregated into normal and abnormal portions.
6)	In PCS equivalent units of production are to be calculated for assigning costs
	to WIP and Finished goods, whereas there is no such requirement fo JCS.
	COST ELEMENTS.
	Both the JCS and the PCS track the same three manufacturing cost elements, namely,: direct materials, direct labor, and manufacturing overhead.