Question

Which of the following describes the differences between job-order and process costing?

A. Job-order costing is used in financial accounting while process costing is used in managerial accounting.
B. Job-order costing can only be used by manufacturers; service enterprises must use process costing.
C. Job-order costing is voluntary while process costing is mandatory.
D. Job-order costing traces costs to jobs while process costing traces costs todepartments and averages the costs among the units worked on during the period.

Answer 1

Job-order costing traces costs to jobs while process costing traces costs to departments and averages the costs among the units worked on during the period.

Step-by-step explanation:

D. Job-order costing traces costs to jobs while process costing traces costs to departments and averages the costs among the units worked on during the period.

Job-order costing is a costing method used by companies that produce unique, customized products or services. It traces costs to individual jobs or orders. Process costing, on the other hand, is used by companies that produce homogenous products in a continuous production process. It traces costs to departments or processes and averages the costs among the units worked on during the period.

The key difference between job-order costing and process costing is found in the tracking of production costs. Job-order costing is used when products are distinct, customized, or produced in small batches and traces costs directly to each job or project. In contrast, process costing is suitable for homogeneous products produced en masse, allocating costs over departments and averaging them across units produced during a period.