Job costing is the accumulation of the costs of materials, labor and overhead for a specific job at any time. Job costing is important in tracing the overall cost for specific jobs and determining whether the costs are deductible for a similar job at later dates. Process costing applies in instances where there is mass production of similar products. In the process costing, costs are accumulated over a period , summarized, analyzed and allocated to the units of products produced over that duration of time as asserted by Kaplan and Atkinson (2015 ).
Similarities
Both processes have the same purpose, which is to assign, labor, materials, and overhead costs in ten production process. According to Kaplan and Atkinson (2015), the two processes provide a detailed mechanism for computation of the unit product cost in the production process. They both use the basic manufacturing accounts principles in computing the unit costs, including the manufacturing overhead, raw materials, and the finished goods. In both systems, the flow of costs through the manufacturing accounts is the same.
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Differences
As with the job costing, different jobs are worked on during each period, with different material and cost requirements. The process costing allows for a single product to be produced on a continuous basis or over a lengthy period , with all identical products. As with the job costing, costs are accumulated by an individual job. In the process costing, accumulation of costs is by different departments which work in unison towards the realization of a similar product in the company ( Kaplan and Atkinson, 2015) .
Application
Job and process costing are both applicable in manufacturing industries. The two costing methods are used to control raw materials, labor and overhead costs in the economies of scale scenario. Retail companies, such as clothing companies will also apply for the use job, and process costing methods. Retailers want to find an effective way of placing individual costs per product to determine their profit margin. In this case, they use job and process costing to determine the recommended retail price for all their products as much as the profit margins.
Reference
Kaplan, R. S., & Atkinson, A. A. (2015). Advanced management accounting . PHI Learning.
