Question

Discuss the difference between job order costing and process cost systems.  Use examples to demonstrate the differences.

Answer 1

Difference between Job-Order and Process Costing

There are many differences between job-order costing and process costing. Some of them are as follows

(1) Process costing is used when a company produces a continuous flow of units that are impossible to differentiate from one another for example production of bread is an example of the process costing where produced goods follow the same process and having same qualtity. Job-order costing is used when a company produces many different jobs that have unique production requirements for example production of aluminium sheet of different specifications and meausrement

(2)Second, under process costing,there is no need to segregate the cost on the heads of materials, labor, and overhead costs with a particular Job order because under process costing system each order is filled up from the commonly produced goods as produced units are virtually identical from the production line

In process costing system, cost is accumulated and assigned by department uniformly to all produced units that pass through the process during a period. Job cost sheets are used for particular job and specific cost is identified with a particular job(which we used for job-order costing) are not used to accumulate costs.

(3) In process costing systems unit cost is computed by department wise while in job costing system it is calculated by a particular Job. This differs from job-order costing where unit costs are computed by job on the job cost sheet.