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Job and Process Costing

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Distinguish between job costing and process costing. Describe the difficulties associated with each type. What can companies do in order to price products competitively and avoid some of these difficulties?

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Distinguish between job costing and process costing.
Job costing assigns materials, labor and overhead to individual jobs so each job has a unique set of costs based on the resources consumed by it. For instance, movies each have unique actors, sets, scenary and so forth. Each movie would be a separate job and the costs would be tracked by movie. Each costume and labor hour would be charged to the particular job.

Process costing co-mingles all the units, presuming that are all identical. The total costs for the month are spread across the units produced during the month and the cost per unit is the same for all that month's production. This would make sense for coca-cola ...

Solution Summary

Your discussion is 423 words and gives examples of both process and job costing and discusses difficulties with the methods. Two suggestions are made to avoid the troubles.

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SAC has developed revolutionary manufacturing techniques utilizing its new spark plug manufacturing technology to offer special-order spark plugs for the auto racing industry. The company is currently using process costing for its spark plugs but is considering using job order costing for the new specialty spark plugs. How does job order costing differ from process costing? Should SAC use process or job order costing for the specialty spark plugs? Make a recommendation for SAC. Be sure to fully back up your recommendation.

The Sparklin Automotive Company (SAC) has been in business since 1930. It began business in the United States supplying spark plugs to automotive manufacturers (OEM, the original equipment market) and the automotive aftermarket.

SAC has introduced a new spark plug manufacturing process in the United States that produces a higher quality spark plug guaranteed to last 100,000 miles. The introduction of this spark plug has been very successful in the United States.

In addition to these types of projects, your responsibilities include creating and analyzing the monthly performance of each plant and consolidating the results into a set of financial statements footnoted with explanations.

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