University:
Grand Rapids Community College
Course:
Financial and Managerial Accounting: Information for Decisions - John J. Wild
Academic year:

2024
Views:

500

Pages:

1
Author:

stud_ice13

Process Costing vs. Job Order Costing: Process Costing is used in industries with mass production of similar products in a continuous flow, such as Kraft Heinz's trail mix production in its Planters division. Process costing is ideal for these operations because the production process is standardized, allowing costs to be evenly distributed across all units. Each step (or process) within production, like "Roasting" and "Blending" in the example of GenX's FitMix, is treated as a distinct department that adds costs (direct labor, materials, and overhead) to the product until completion. Job Order Costing, on the other hand, is used in industries producing unique or customized products. Each job is treated as a separate entity with distinct costs assigned to that specific order, making this system effective for operations such as custom furniture making or specific marketing campaigns. Key Differences Feature Process Costing Continuous, high-volume, identical Production Type products Cost By process or department Accumulation Food production, chemical Examples manufacturing Job Order Costing Custom, unique, or small batch production By individual job or order Custom furniture, specialized printing Costs are totaled and averaged for Cost Calculation Average cost per unit across all units each job Accumulated by process stage or Accumulated per job order Tracking Costs department Similarities: Both systems use materials, labor, and overhead costs, and both aim to calculate the cost per unit to determine profitability. In summary, process costing is for homogeneous, continuous production, while job order costing is for unique, individualized production, each system tailored to meet the demands of the respective production environment.