Compare And Contrast Job Costing And Process Costing

1005 Words 5 Pages
Briefly compare and contrast job costing with process costing.
Job costing, according to Heisinger and Hoyle (2012) is a “system of assigning costs used by companies that produce unique products or jobs” while on the other hand, a process costing is a “system of assigning costs used by companies that produce similar or identical units of product in batches employing a consistent process” (p. 242). In other words, in a job costing system, a company can accumulate production cost to a specific unit. It is often used by companies involved in creating customized products like airplanes, advanced technology systems, and accounting. As for a process costing, it often involved the accumulation of costs for lengthy production runs, especially products
…show more content…
The two systems similarly track product costs involving direct materials, direct labor, and manufacturing overhead. However, a sharp contrast to job costing with process costing is that in job costing, product costs are assigned to individual jobs while process costing assigns costs to departments. While job costing is used for unique products such as customized furniture and airplane, process costing is used for standardized products such as chewing gum, facial products etc. Further, it should be noted that job costing is essentially used for a relatively small production while process costing is used to track large production
Another comparison of job costing with process costing is that both costings provide unit cost information that is needed by management for decision-making purposes. However, in job costing, unit cost information comes from the job cost sheet while in process costing; unit cost information comes from the departmental production cost
…show more content…
This is how various departments will requisition direct materials and have various journal entered until the job is completed. While each department has different work-in-process inventory accounts used to track production costs, they also have direct labor costs that are recorded directly in the production department’s work-in-process inventory account. This often reflects as wages payable. Additionally, various production departments will record an overhead cost in the manufacturing overhead journal with the appropriate entry. Eventually, every department would then prepare its report for the assessment of the finished product. What is contained in a product cost report?
There are various elements that are contained in a product cost report. First, a product cost is the total summary of what was spent in the production of a product and the activity of a production department during a period of time (Heisinger & Hoyle, 2012). That said, the elements contained in a product cost report include direct materials, direct labor, manufacturing overhead, beginning WIP inventory

Related Documents