Question

Compare and contrast process costing and job costing. What is the similar objective between the two?

Answer 1

Answer:

Process costing- Process costing is the method for collecting and assigning manufacturing cost to the units produced. This method is used when identical units are produced in bulk.

Job costing- This method is used to collect and assign manufacturing cost to the units that differ from each other. This method is used when units are not identical and they vary from one another.

Differences- Are as following:

1. In process costing, the nature of the production is standardized while in job costing nature of the production is customized.
2. Process costing determines the cost of whole process while Job costing calculates cost of each job.
3. For process costing, process is the cost center while in job costing, job is the cost center.
4. In process costing, scope of cost reduction is high while in job costing, scope of cost reduction is less.
5. In process costing, cost is transferred from one process to another while in job costing, it cannot be done.
6. Process costing is good for those companies, where identical units are made in bulk while job costing is suitable for the companies which manufacture products as per customer's demand.