Question

1- Identify two products you purchased in the last year—one for under $5 and one for over $100—and indicate whether you think they were accounted for using job order costing or process costing and why.

Answer 1

Job order costing is a system of expense monitoring in which a business only creates products to fill customer/client orders. Employees complete job order cost sheets for each order and usually separate expenses into three main categories: direct material, direct labor and manufacturing overhead. Companies in many industries can use job order costing, though a variety of product offerings/services complicates the tracking of expenses.
Manufacturing companies incorporate job order costing as a means of controlling usage of raw materials, production equipment and labor hours. These businesses consider each customer order a separate job for the purposes of job order costing. Alternatively, manufacturers may group smaller value projects together under a single job heading. How manufacturers group jobs depends on the size of the company.
Let's consider an example
a small business manufacturer may consider any job valued over $1,000 as a single job, but they may group smaller customer orders together in blocks of $1,000 for costing purposes.
Companies in the white collar sector of business, including law firms, accounting businesses and private investment companies, can utilize job order costing to manage individual client accounts.
For example
accounting firms can consider each individual client a job.
Medical services and film studios are also examples for this.
Let's consider an example
costing environment is a petroleum refinery, where it is impossible to track the cost of a specific unit of oil as it moves through the refinery.
Under process costing, costs build up over a fixed period, and are then assigned to all the units produced throughout that time frame.
If goods are manufactured with small-scale production runs or on an individual basis, costs are assigned using job costing. If a production process combines elements of mass manufacturing and customisation, a hybrid costing system is used.