Process Costing and Job Costing: A Comparison

Management accounting

INTRODUCTION
Job costing consists of a complete accumulation of production cost attributes towards a particular
unit or the collection of units. For example the furniture’s structure of the custom-designed piece
is accounted with the help of job costing system. The details regarding the costs of every labour
that worked at a particular item of furniture are recorded inside a time sheet, and after then it is
accumulated on a cost sheet of that particular job. Though, job order costing is different from
process costing. As manufacturers make use of process costing that produce a wide range of
quantities of the accurate similar ‘widget’ in single continuous process flow (Malmi, 2016).
Present essay revolves around the discussion relating to process costing and job costing in order
to explain core concepts relating to these costing methods.
REASON BEHIND APPLICATION OF JOB COSTING OR PROCESS
COSTING
When companies want to allocate the product costs towards units of output, then the company
adopts the method of process costing. To know about the identical units’ mass production like as
cereal, refreshments and pharmaceuticals, make use of process costing to find out the cost of
every single unit. However, for tracking the costs of mass-produced items, companies use
process costing, and whereas to tracking costs of producing exclusive products, companies make
use of job costing. As per assertions of Kaplan and Atkinson (2015), under job costing method,
Product costs are tied up with specific jobs. Some companies that used the job costing method
include medical services or hospitals, film studios, service oriented and construction companies.
However, in what manner job order costing is different is that for the process costing, the cost of
each unit is accumulated in a definite time period for a particular department. Whereas process is
costing consists of costs’ accumulation for the purpose of wide production and it involves
products that are impossible to differentiate from one another. For instance, cost account
accumulated the production of 100,000 gasoline’s gallons is necessary that is the oil which is
utilized in the process and all labours that are involved in a refinery facility, and divide it by the
number of units produced to reach at a cost per unit. Costs are possibly accumulated at the