Compare the characteristics of job costing and process costing. Consider how each method impacts the accounting...

Compare the characteristics of job costing and process costing. Consider how each method impacts the accounting work involved.

Expert Solution

The ultimate purpose of both Job costing and Process costing is to enable the organisation to arrive at the cost of their products. For this, the cost for materials inventory, labor and overhead are recorded in a separate account. The total cost for this account is then transferred to a Work in progress (WIP) account.

Under the method of Job costing, the actual cost for materials and labor are recorded for specific jobs and the overhead cost is assigned to the jobs at a pre-determined rate. However, under Process costing, overhead cost is applied based on the average number of units produced per day. Hence, the calculation of unit cost differs under both these methods

As per job costing, Unit Cost = Total Activity (Job) Cost divided by the Number of Units Produced in the Activity (Job)

As per process costing, Unit Cost = Overhead Cost for a specific period divided by the Number of Units Produced in the Period

ekkarill92 answered 1 year ago

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