ACCT 505 Week 2 Discussion A

Welcome to our Week 2 Discussions! Let's begin by discussing when job order costing systems would be more effective than a process costing system. Please give examples of types of businesses in which each would be appro ...

Welcome to our Week 2 Discussions! Let's begin by discussing when job order costing systems would be more effective than a process costing system. Please give examples of types of businesses in which each would be appropriate. Do these costing systems apply only to manufacturing? Sort byResponse Sort byAuthor Sort byDate/Time* Job ordering and Process Costing Joseph Martinez 9/5/2016 10:33:16 AM Some of the differences in these systems is that job costing records the actual materials and labor expenses for specific jobs, and assigns overhead to jobs at a pre-determined rate. While process costing applies costs to departments based on the average number of units produced per day. Job order and process costing have unique advantages and disadvantages that make them best suited for specific situations. For example, one advantage of job order costing is that it allows managers to calculate the profit earned on individual jobs, helping them to better ascertain whether specific jobs are desirable to pursue in the future. This is best for businesses that do highly custom work, such as construction contractors and consultants. In addition, an advantage of process costing is that it allows managers to get detailed information on the production statistics of individual departments or workgroups. This is best suited for continuous manufacturing settings, such as factories and utility companies. http://smallbusiness.chron.com/advantages-disadvantages-job-order-costing-process-costing-3082.html Job Order and Process Costing Systems Md Ali Azam Rasel 9/5/2016 12:40:25 PM The way that I understand both of these is job-order costing is the amount it takes to complete the job compared to the revenue of the job. Process costing is the amount each unit costs to make in large amounts. I would say that you would use job-order costing when doing a contracting job, or making a special product for one person, you want to know what the costs are per job per customer. You would use process costing when you are making a huge batch of something, like some one who produces toys for the holidays. Job order and process costing systems Thomas Hanung Lukito Pradipto 9/5/2016 1:55:50 PM Professor and Class, According to the source from keydifferences.com there are some definition regarding job costing and process costing, which are : 1. Job costing / order : A method of costing in which cost of each "job" is determined is known as job costing. Here job refers to a specific work or assignment or a contract where the work is performed according to the customer's instructions and requirements. The output of each job consist of normally one or less number of units. In this method, each job is considered as a distinct entity, for which cost is ascertained. Job costing is applied when meets several criteria such as :  the execution of the jobs is on the basis of client's specification.  all the jobs heterogeneous in many respects, and each job require separate treatment.  there is differences in "WIP" (Work in Progress), of each period. Job costing is best suited for the industries where specialized products are manufactured as per customer needs and demand. (Example : furniture, ship building, interior decoration, etc.) 2. Process costing : A costing technique, which is used to calculate the cost of each process is known as process costing. Here process refers to a separate stage where production is performed to convert the raw material into an another identifiable form. Process costing is used in the industry where identical products are produced in huge quantities. In process costing, the plant is divided into some processes where the production is performed either sequentially, parallelly, or selectively. Output from former process is become input for later process, and at the end the last output process is the final product. The individual account process is prepared for each process. Process costing is best suited for large-scale production. (Example : soap manufacture, soda manufacture, paint manufacture, etc.) The process costing system is only apply in manufacture or plant industry, while job costing is apply in more custom product industries.