Question

The first discussion question went over job order costing and the second discussion question focuses on process costing. What are the differences between job order and process costing? Is one better than the other or does it depend on the business? Explain.

Answer 1

Solution:

Job order Vs Process costing

Job costing means that form of specific order costing ,which is applied where work is undertaken to customers' specific requirements. It is applied in such industries which produce definite need's against individual orders from customers.Each job is separately identified and a job card is prepared for each job for cost calculation.printers,machine tool manufacturers , general engineering works are the exampiles of indutries applying job order costing.

Process costing is a method of costing applied in such concerns where the process of production is completed in distinct stages.The output of one process is converted to next process till finished product is obtained from the finishing process. cost per unit at the end of each process is obtained on dividing the total cost at the end of the process by the total number of units obtained at the end of the process. chemical manufacturing,oil refining, paint manufacturing, glass works, cement manufacturing etc are the exampiles for industries applying process costing.

It is clear from the above methods of costing(Job order costing and process costing) .Each of these methods are depends upon the business. It's not possible to compare both the methods because each of these has it's own merits and demerits.