Difference Between Job Costing And Process Costing

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Job-order costing and process costing are two method that determining unit product costs. Process costing is used when industries that convert raw materials into homogeneous product, such as bricks, or paper on a continuous basis while Job-order costing is used when many different jobs or products are worked on each period. According to Kohler, in his book “Dictionary for Accountants” describe the method of process costing a cost accounting whereby costs are charged to processes or operations and averaged over units produced. Based on S.P. Iyengar defines the process costing as, a form of operation costing which applies where standardized goods are produced.
Job-order costing and process costing has similarities and differences. The similarities is both method designate material, labour and overhead cost to product and they provide a mechanism for computing unit product cost. Besides that, both system use the same manufacturing accounts, including manufacturing overhead, raw materials, work in process and finished goods.
The differences of this two system is process costing used when a single product is produced on a continuing basis or for a long period of time. Other than that, Process costing system accumulate costs by department but difference with job-order costing system which accumulated costs by individual jobs.
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As we know process costing is convenient for homogeneous products, but fails to provide an accurate estimate of product costs when a single process produces items or same item but different versions. It also convenient only for bulk process works and not for customized orders. The division of joint costs to various products may cause to irrational pricing decisions in such cases. Process costing allow budgeting standard costs, the costs acquires are too old and not relevant also not use current cost, and their use for managerial decision-making remains

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