What is the Difference Between Job Order Costing and Process Costing?
🆚 Go to Comparative Table 🆚Job order costing and process costing are two different cost accounting methods used in businesses to track costs and revenue associated with their products or services. The main differences between these two methods are as follows:
- Uniqueness of Product: Job order costing is used for unique products, while process costing is used for standardized products.
- Production: In job order costing, production is customized, whereas it is standardized in process costing.
- Assignment: In job order costing, the cost is calculated for each job, while in process costing, the cost is first determined by the process and then decided based on the number of units produced.
- Cost Reduction: Job order costing has fewer opportunities for cost reduction compared to process costing.
- Size of Job: Job order costing is best for small production units, while process costing is best for large production units.
- Record Keeping: Job order costing requires more detailed record keeping, as time and materials must be charged to specific jobs. Process costing aggregates costs, requiring less record keeping.
- Work in Progress: With job order costing, there may or may not be any work in progress (WIP). With process costing, there is always WIP at the beginning and end of a period.
- Billing: Job order costing is more likely to be used for billings to customers, as it details the exact costs consumed by projects commissioned by customers.
On this pageWhat is the Difference Between Job Order Costing and Process Costing? Comparative Table: Job Order Costing vs Process Costing
Comparative Table: Job Order Costing vs Process Costing
Here is a table comparing the differences between job order costing and process costing:
| Aspect | Job Order Costing | Process Costing |
|---|---|---|
| Product Type | Custom order, unique products | Mass production, standardized products |
| Examples | Signs, buildings, tax returns, custom-designed furniture | Folding tables, toys, buffet restaurants |
| Cost Accumulation | Job lot, individual job cost sheets | Accumulated per process, separate work in process inventory department |
| Work in Process Inventory | Individual job cost sheets | Separate work in process inventory department |
| Record Keeping | Individual job cost sheets, more detailed record keeping required | Less detailed record keeping required, costs aggregated |
| Size of Job | Small production runs, single-unit jobs | Large production runs |
Both job order costing and process costing maintain the costs of direct material, direct labor, and manufacturing overhead. However, the difference between the two systems lies in how the costs are assigned to the products and the production process.
Read more:
- Job Costing vs Contract Costing
- Job Costing vs Batch Costing
- Costing vs Cost Accounting
- Management Accounting vs Cost Accounting
- Activity Based Costing vs Traditional Costing
- Marginal Costing vs Differential Costing
- Costing vs Budgeting
- Financial Accounting vs Cost Accounting
- Price vs Cost
- Unit Price vs Unit Cost
- Absorption Costing vs Activity Based Costing
- Data Modeling vs Process Modeling
- Absorption Costing vs Variable Costing
- Actual Cost vs Standard Cost
- Cost Center vs Profit Center
- Absorption Costing vs Marginal Costing
- Project Management vs Operation Management
- Work vs Job
- Production vs Operation Management