Job Costing Essay

Job costing is a system that assigns manufacturing costs to a product or batches of products. This system is used when the end products are different from each other. The job cost companies will allocate the direct materials and direct labor actually used plus the manufacturing overhead to each job. The job costing is very popular not only in manufacturing, but also in service (accounting practices, law firms, etc) and builders and construction contractors.
Job costing involves the following accounting activities:
• Materials. It accumulates the cost of components and then assigns these costs to a product or project once the components are used.
• Labor. Employees enter their time to specific jobs, which are then assigned to the specific jobs
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“It accumulates overhead costs in cost pools, and then allocates these costs to jobs.” (Accounting Tools, 2017)
a. Job Costing Allocation of Materials
In job costing, materials are used from the moment were bought and brought into the company to the final product.
The journal flow
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(Walther & Skousen, 2009)
Similarities between Job costing and Process costing:
• Both are used to calculate the cost of products.
• Both have the same cost steps. Both Job cost and Process cost record production in separate accounts for materials inventory, labor, and overhead. The costs are moved to a Work in Process Inventory account.
• Both use pre-calculated overhead rates to apply overhead.
Differences between job costing and process costing:
• Types of products produced. Companies that use job costing have different jobs with different production requirements during each period. Companies that use process costing produce a single product, usually for a long period of time.
• Cost accumulation approaches. Job costing does costing accumulation by job as opposed of Process costing that does it by department or by process.
• Work in Process Inventory accounts. Job cost systems have one Work in Process Inventory account for each job. Process cost systems have a Work in Process Inventory account for each department or process.

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