Question

What are the major differences between job-order costing and process costing systems? Give an example of a well-known company that might use job-order costing and an example of a well-known company that might use process costing. Explain why you have chosen the companies that you did, specifically why job order costing or process costing are used. Do not choose companies that your classmates have already commented upon. Participate in follow-up discussion by critiquing your classmates' choices of companies.

Answer 1

Differences between job-order costing and process costing include:

1) uniqueness of product

2) size of job

3) record keeping

4) customer billing

Step-by-step explanation:

1) uniqueness of product; Job costing is used for unique products, and process costing is used for standardized products.

2) size of job; Job costing is used for very small production runs, and process costing is used for large production runs.

3) record keeping; Much more record keeping is required for job costing, since time and materials must be charged to specific jobs. Process costing aggregates costs, and so requires less record keeping.

4) customer billing; Job costing is more likely to be used for billings to customers, since it details the exact costs consumed by projects commissioned by customers.

Companies that use job order costing include:

1) Accounting firms

2) Law firms

3) Hospital etc.

These companies mentioned uses job-order costing because the job carried out have unique distinguishing characteristics.

Companies that used process costing include;

1) Chevron corporation

2) Pittsburgh paint etc

These companies used process costing because they deal with mass production of similar product, where the costs associated with individual units of output cannot be differentiated from each other.