Job order Costing and Process Costing Assignment Help

Job-order and process costing are two major product costing approaches for accumulating costs and assigning them to products or services. In process costing system, all units produced within a given time period are assigned the same cost (Finkler, Ward & Baker, 2007). In contrary to this, in job-order costing the cost of producing the units for each job are measured separately. There are several similarities and differences between both these costing methods.

 

Compare and contrast job order costing to process costing methods Job order costing and process costing methods are similar mainly in three ways. First, both costing systems identify three manufacturing cost elements such as direct materials, direct labor and manufacturing overhead. Secondly, both methods also accumulated the costs of materials, labor and overhead. For example, these costing system debit raw materials to raw materials inventory. Thirdly, the flow of costs under both costing system is also same (Weygandt, Kimmel & Kieso, 2009). It is because after accumulating all manufacturing costs, both systems assign different costs to the same account including work in process accounts, finished goods inventory and cost of goods sold. Besides above similarities our accounting case study assignment help experts said that , there are also some differences between job order costing and process cost system. First, process cost system uses multiple works in process accounts while job order cost system uses only one work in process account. Secondly, costs are summarized in a production cost report for each department under process cost system, whereas costs are charged to individual jobs and summarized in a job cost sheet under job order cost systems (Hansen & Mowen, 2006). Thirdly, total costs are computed in job order cost system, when the job is completed, while under process cost system, costs are totaled at the end of a period of time. In last, in job order costing method, the unit cost is the total cost per job divided by the unit produced, on the other hand, in process cost system; the unit cost is total manufacturing costs for the period divided by the units producing for that period (Weygandt, Kimmel & Kieso, 2009).

 

Appropriateness of Each Costing method to different Companies Use of job order cost system is better for those service companies, which provide specific, non-routine services to their clients. On the other side, for those service companies, which perform routine, repetitive services, use of process cost system will be beneficial for such companies. In addition, Use of process cost systems are also beneficial for those companies, which apply costs to similar product that are mass produced in a continuous fashion (Weygandt, Kimmel & Kieso, 2009). Thus, it can be used by several companies including bottling company, oil refining company, producing paint products, steel manufacturing, etc. There are several examples of companies, which use process cost systems for costing purpose such as Ben & Jerry uses it for the production of ice cream, USX uses process costing in the steel manufacturing, etc. On the other hand our business assignment help experts says that, as under job order cost system, costs are assigned to a specific job, therefore use of this system is beneficial for those companies, which work in different jobs such as construction of a customized home, making of a motion picture and manufacturing of a specialized machine. Therefore, it can be sated that use of Job-order costing will be beneficial for those companies, which produce a wide variety of heterogeneous products; on the other hand, when firms produce a homogeneous product in mass, use of process cost system will be beneficial for the company (Kinney & Raiborn, 2012).

 

Recommendation The company plans to start with only one version of the product but, at some point in the future it may offer a variety of options, in this situation the use of job order costing will be beneficial for the company. It is because if the company selects process order costing for assigning costs it will difficult for the company to apply this cost system in case if it offers a variety of options in future. As, process cost system is useful only in case for similar products, if the company offer a variety of options, company cannot continue this method in future period. In this concern, the use of job order costing system will be effective for the company, as firm can continue this costing system in future period as well.

 

References Finkler, S. A., Ward, D. M. & Baker, J. J. (2007). Essentials of Cost Accounting for Health Care Organizations. UK: Jones & Bartlett Learning. Hansen, D. R. & Mowen, M. M. (2006). Managerial Accounting. USA: Cengage Learning. Kinney, M. R. & Raiborn, C. A. (2012). Cost Accounting: Foundations and Evolutions. USA: Cengage Learning. Weygandt, J. J., Kimmel, P. D. & Kieso, D. E. (2009). Managerial Accounting: Tools for Business Decision Making. USA: John Wiley & Sons.