ACC 311 2-2 Short Paper

School: Southern New Hampshire University - Course: ACC 311 - Subject: Accounting

Job Costing vs Process Costing Characteristics: Job costing system is best described as the cost object is a unit or multiple units of a distinct product or service called a job. Job costing sells heterogeneous products. The orders would never be the same, the costs of labor and materials won't be the same as another order. Job costing is basically by the cost whereas process costing is by the department. Process costing system is best described as the cost object in masses of identical or similar units of a product or service. With process costing you're selling homogeneous products. The orders are put through each department such as an assembly, decorating, and packaging, but the products would all be the same. The unit cost of an item is based on the average cost basis. Job Costing vs Process Costing Example: An example of job costing would be selling custom made furniture such as a custom couch or custom table. These orders would be completely different because one could be staining an oak table a reddish color which could take a few days whereas customizing a couch with a different material could take weeks. An example of process costing could be toy cars which would go through the assembly department then the painting department then the packaging department. Though the little cars could be different colors, they are the same item. The materials of the colors could cost a different amount, but the product is similar. Service Industry Costing Differences: In the service industry, the job costing method would be used for jobs like advertising because it would be most useful in assigning indirect costs such as activity based costing. In the service industry, the process costing method would be good for retail banking, postal delivery, and credit cards.

Service Industry Costing Benefits: The benefits of service industry costing