Difference Between Job And Process Costing System

Job and Process Costing Systems Costing as defined by Blocher, Stout, Juras, and Cokins (2016) ‘is the process of accumulating, classifying, and assigning direct materials, direct labor, and factory overhead costs to cost objects, which most commonly are products, services, or projects” (p. 96). Further relayed by Blocher et al. (2016), is the type of costing system a company employs depends on the industry, product or service manufactured or provided, and the benefit versus the cost of the particular system chosen. Job and process costing systems are two different avenues by which companies can accumulate their costs as a first step in determining accurate pricing for their product or service. While one method tracks costs that can be specifically attached to a unique product, batch of products, or service, and then also allocates the overhead to the individual units or services, the other method also tracks the direct costs but accumulates the overhead costs for the shared services used to produce indistinguishable products, then assigns them to a functional department, and from there assigns them to products. Job and process costing system characteristics are examined in further detail, and examples of companies that use each are provided.

Job

Hicks (2010) espouses that sometimes costs are the result of processes related to the production of indistinguishable products, and thus it is not feasible to attribute their expenditures to specific products. Hence, the application of job or process costing systems to apportion fairly the indirect costs to products and services depends on the type of industry and product or service produced. As Hicks (2010) further maintains, it is these indirect cost allocations, that when performed correctly, can provide managers with better information for planning, decision making, cost control and predicting future