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Job Order Costing

Job order costing determines its cost of production based on estimates for the orders being provided by the customers. For organizations considering individual jobs as a sole unit of output or where a diverse set of products are offered by the firm this costing method is ideal as its flexible and values each order separately from the other. Labor hours, materials and hours utilized by machines will vary from one job to the other and as per the different requirements of the customers. It is highly suitable for customized offerings where higher resource support is required. Such cost of costing approach helps a firm in keeping track of all individual products and is greatly helpful when a firm has unique products within its ranks.

For organizations producing multiple products with different specifications and classifications, job order costing is ideal. The multiple products being produced by the company will all have different cost and the resources being required by them would also be greatly different. As the job order costing deploys job cost sheets all cost starting from the materials inventory to the work in process inventory and then finally moving into finished goods will all be tracked efficiently. This type of costing helps firms in quoting prices for tenders, as such costing help in keeping track of multiple products (White, M, 2006).

Process Costing System

Process costing is ideal when the firm produces a single product in mass quantity. Like the job order costing, process costing too provides organizations with per unit cost which incorporates the manufacturing overheads as well the direct cost associated with a product. For goods produced in mass quantity with uniformity across all this sort of costing is ideal. Process costing is similar to job order costing as it is calculated by incorporating total cost of manufacturing by the total units being produced by the firm.

The difference between the two is that job order costing covers the cost for the product through the life of an order as opposed to process costing which covers the cost of an order being produced. Both the process and job order costing involves the similar expenses of manufacturing such as the direct material, direct labor, finished goods and work in process. Process costing provides cost per the whole department instead of giving per unit cost for every department (Atkinson, A.A., Kaplan, R.S., and Young, S.M, 2005).

Requisition for material is deployed during the production to ensure that the requirements for materials are update as when required by the organization (Garrison, R.H., Noreen, E.W., and Brewer, P.C, 2008).

Process Costing and Job order Costing Similarities

Both job order and process costing adopts the same mechanism for the computation of unit cost of product. Cost assigned to the products in the form of overhead, labor and material cost are similar for both the costing approaches.

Process Costing and Job order costing adopts similar accountants manufacturing principles such as Raw Materials, Finished Goods, and Work in process and manufacturing ...
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