Job Order costing and process costing

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In order to address this assignment, let us first understand the difference between Job Order costing and process costing.

Job order costing is a technique that determines costs for orders or jobs and is more appropriate in scenarios that involve smaller production runs and production of different types of products. For example, production scenarios such as manufacturing of garments where specification of products vary for different orders is a good case for job order costing. Process costing, on the other hand, is more suitable for scenarios where long production run takes place for manufacturing homogenous or identical products, such as automobile assembly line.

In the case of job order costing, material required for production may vary from one order to another, but it is not the case for process costing as identical products are being manufactured. Similarly, skilled labor varies as per different specifications in the case of job order costing.

In the case of job order costing, cost is accumulated by individual orders or jobs whereas in the case of process costing, costs are accumulated by individual departments. This is due to the fact that different types of orders are being handled during a given period with different production requirements, whereas a single product is produced in the case ...