Difference between job order and process costing:
The differences between job order costing and process costing arise from two factors. The first is that the flow of units in a process costing system is more or less continuous, and the second is that these units are indistinguishable from one another. Under process costing it makes no sense to try to identify materials, labor, and overhead costs with a particular order from a customer ( as we do with job order costing ), since each order is just one of many that are filled from a continuous flow of virtually identical units from the production line. Under process costing, we accumulate costs by department rather than by order, assign these costs uniformly to all units that pass through the department during a period.
A further difference between the two costing systems is that the job cost sheet is not used in process costing, since the focal point of process costing is on departments. Instead of using job cost sheet a production report is prepared for each department in which work is done on products. The production report serves several functions. It provides a summary of number of units moving through a department during a period, and it also provides a computation of unit costs. In addition it shows what costs were charged to the department and what disposition was made on these costs. The department production report is a key document in a process costing system.
These differences are summarized below:
Job Order Costing Process Costing
1. Many different jobs are worked on during each period, with each job having different production requirements.
2. Costs are accumulated by individual job.
3. Job cost sheet is the key document controlling the accumulation of costs by a job.
4. Unit costs are computed by job on the job cost sheet. 1. A single product is produced either on continuous basis or for long periods. All units of product are identical.
2. Costs are accumulated by departments.
3. The department production report is the key document showing the accumulation and disposition of costs.
4. Unit costs are computed by department on the department production report.
The differences between job order costing and process costing arise from two factors. The first is that the flow of units in a process costing system is more or less continuous, and the second is that these units are indistinguishable from one another. Under process costing it makes no sense to try to identify materials, labor, and overhead costs with a particular order from a customer ( as we do with job order costing ), since each order is just one of many that are filled from a continuous flow of virtually identical units from the production line. Under process costing, we accumulate costs by department rather than by order, assign these costs uniformly to all units that pass through the department during a period.
A further difference between the two costing systems is that the job cost sheet is not used in process costing, since the focal point of process costing is on departments. Instead of using job cost sheet a production report is prepared for each department in which work is done on products. The production report serves several functions. It provides a summary of number of units moving through a department during a period, and it also provides a computation of unit costs. In addition it shows what costs were charged to the department and what disposition was made on these costs. The department production report is a key document in a process costing system.
These differences are summarized below:
Job Order Costing Process Costing
1. Many different jobs are worked on during each period, with each job having different production requirements.
2. Costs are accumulated by individual job.
3. Job cost sheet is the key document controlling the accumulation of costs by a job.
4. Unit costs are computed by job on the job cost sheet. 1. A single product is produced either on continuous basis or for long periods. All units of product are identical.
2. Costs are accumulated by departments.
3. The department production report is the key document showing the accumulation and disposition of costs.
4. Unit costs are computed by department on the department production report.
