Question

LO 5.1Explain how process costing differs from job order costing.

Answer 1

Answer:

one is used to perform single task; while the other for batch processes.

Explanation:

In Job order costing the costs and production or manufacturing specifications are usually not identical for each product or customer which makes the direct material and direct labor costs easily traceable to the final product. Job order costing example is often found in the manufacturing of a car by a company.

However, in Process costing it is used when dealing with batch processes and when a standardized process is required to manufacture identical products and the direct material, direct labor, and manufacturing overhead cannot be easily or economically traced to a specific product.

So the main difference between process costing and job order costing is how the costs are assigned to the products either one is costed to a single task; while the other cost is spread over batch processes.

Process costing examples of batch process includes:

1. book production
2. biscuits production
3. textile production etc