Similarities Between Job Order and
Process Costing System:
Learning Objectives of this
What are the differences and
similarities in process costing and job order costing procedures.
Similarities between job order and process costing systems
can be summarized as follows.
Both systems have the same basic purposes-to assign material, labor, and
overhead costs to products and to provide mechanism for computing unit product
Both systems use the same basic manufacturing accountants, including
manufacturing overhead, Raw materials, Work in process, and Finished Good.
The flow of costs through the manufacturing accounts is basically the same
in both systems.
Difference Between Job Order and Process Costing:
The differences between job order costing and process costing arise from two
factors. The first is that the flow of units in a process costing system is more
or less continuous, and the second is that these units are indistinguishable
from one another. Under process costing it makes no sense to try to identify
materials, labor, and overhead costs with a particular order from a customer (
as we do with job order costing ), since each order is just one of many
that are filled from a continuous flow of virtually identical units from the
production line. Under process costing, we accumulate costs by department
rather than by order, assign these costs uniformly to all units that pass
through the department during a period.
A further difference between the two costing systems is that the job cost
sheet is not used in process costing, since the focal point of process costing
is on departments. Instead of using job cost sheet a production report is
prepared for each department in which work is done on products. The production
report serves several functions. It provides a summary of number of units moving
through a department during a period, and it also provides a computation of unit
costs. In addition it shows what costs were charged to the department and what
disposition was made on these costs. The department production report is a key
document in a process costing system.
These differences are summarized below:
Job Order Costing
Many different jobs are worked on during each period, with
each job having different production requirements.
Costs are accumulated by individual job.
Job cost sheet is the key document controlling the
accumulation of costs by a job.
Unit costs are computed by job on the job cost sheet.
A single product is produced either on continuous basis or
for long periods. All units of product are identical.
Costs are accumulated by departments.
The department production report is the key document
showing the accumulation and disposition of costs.
Unit costs are computed by department on the department