Difference Between Job Costing And Process Costing

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Job Order Costing, Process Costing and Activity Based Costing BN160722 BUS 530 Managerial Accounting Professor: Dr. Kaveh Shamsa Westcliff University 22/11/2016 Abstract This study focuses on the job order costing, process costing and activity based costing. This paper will be discussing difference and similarities between job order costing and process costing. This paper will be discussing which costing system is suitable for service organization like advertising agency. This study will focus on the importance of job order costing and process costing in the decision making of an organization. This paper will be discussing two example where activity based costing is more preferable than traditional costing. This study is conducted…show more content…
Difference between Job Order Costing and Process Costing The difference between Job order costing and process costing are mentioned in the following points: • Job costing is the costing method that is utilized for the ascertainment of the cost of each job. Process costing is the costing method that is utilized to determine the cost of each process. • In Job order costing, the product cost is appointed to each job. In Process costing, the product cost is assigned to each process (Heisinger & Hoyle, 2012). • In job order costing, the unit cost information originated from the job cost sheet. In process costing, the unit cost information is derived from the departmental production cost reports. • In job order costing, one work-in-process inventory account is used while several work-in-process inventory accounts are used in process costing. • The possibility of decreasing the cost is relatively low in job order costing while the possibility of cost reduction is high in process costing. • In job order costing, the cost is not transferred from one job to another while the cost of last process is transferred to the next department in process…show more content…
Similarly, it helps in understanding which product is more beneficial for the organization and where to focus their sales efforts. Activity based costing provides the manager with more accurate pricing and assurance of least order size. It helps them to spend less time, money and exertion on the wrong items. Thus activity based costing is very useful for decision making about including or erasing product from the product portfolio, pricing, cost accuracy, choosing among outsourcing and insourcing production and assessing process change
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