Process Costing Comparison

972 Words2 Pages

Running head: JOB ORDER COSTING AND PROCESS COSTING COMPARED
.
1
Job Order Costing and Process Costing Compared
Student Name Redacted
University of the People
JOB ORDER COSTING AND PROCESS COSTING COMPARED. 2
Companies require accurate financial information to make a myriad of business decisions including how much to charge their customers for products. Determining the total cost of a product or service is crucial to ensuring profitability and sustainability. There are multiple different methods available to calculate the cost of a product. This paper will define, compare and contrast two cost accounting techniques: process costing and job order costing, which is also referred to as job costing. As Walther and Skousen (2009, page 100) eloquently …show more content…

4 special treatment required for the product or process (Surbhi, 2017). Job costing also requires a lot more record keeping since time and materials much be charged to each individual job whereas process costing aggregates cost (Bragg, 2013). While there are many differences between job costing and process costing, it is possible to use elements of both systems (Bragg,
2013). Companies that have a mixed production system or customize a finished product may use a hybrid cost accounting system.
There are many more differences between job costing and process costing, but this paper has discussed many of the important points while also discussing the few similarities. Due to the drastically different nature between these two cost accounting systems, it is fairly obvious when to use one or the other. There are also other cost accounting methods, including activity-based costing and hybrid systems. Regardless of which cost accounting system is used, accountants still use similar accounts to track inventory, labor, and overhead costs. Cost accounting systems are the way costs are recorded to determine the actual cost of a product unit to help inform and improve management of business

Open Document