Answer

Differences between the Job Order Costing and Process Costing Systems

 The Article that displays the differences in job order costing and process costing can be obtained from http://2012books.lardbucket.org/books/accounting-for-managers/s08-01-comparison-of-job-costing-with.html.  This Article makes definitions of the two processes and provides the differences and similarities. Additionally, the Article stipulates the situations under which the two systems can be used in business organizations. However, this paper will only be focused on the differences that exists between the two systems of cost accounting. Job order costing is done where customers/clients have placed a special order which is unique and has several phases of the production which do not match others which are similar. Therefore, the company that is handling the order will have to bill every job done for the sake of customizing the costs for the customer. Process costing, on the other hand, arises where products are identical and, therefore, use similar production processes. As a result, the costs are calculated at the end of the process by dividing the total cost of production by the number of outputs with the aim of getting the cost of one unit of production. Notably, the process costing is done whether the goods are standard or whether they can be standardized.

From the definitions of the words, there are several differences that can be established between the two processes of cost accounting. Firstly, the product costs in job order costing are assigned to specific jobs that are undertaken on the product while in process costing, the product costs are assigned to departments or processes that are involved in the production of such product. The other difference arises at the stage at which the costs are measured. With relation to job order costing, the costs are calculated at every stage of the job culminating to many cost sheets. However, process costing costs are measured at the end of the production process. Specifically, the costs in process costing are an aggregate of the total cost of production divided by the total unit of production so that the cost of a single unit can be obtained. Thirdly, job order costing is concerned with unique product while the process costing process deals with identical products which can be standardized.

A good example of difference is in the Coca-Cola Company which manufactures cold non-alcoholic beverages. From the figures gathered by the company, more than 11,000 soft drinks from the company are consumed in every second. This means that the company has to make mass production of its products. As a result, it applies the process costing process to measure the costs that have been spend in the making of the beverages. Specifically, after every process in the making of the beverages, the total output is divided by the total cost so that the cost of production of one bottle of its brands can be established. It is difficult for the company to calculate the cost of making each single bottle of beverage. As a result, due to the identical nature of the beverages, and the mass production required, the company produces all the bottles and measures the cost of each diving the total cost with the total output. This case shows the application of the two methods of cost accounting. Specifically, process costing is used where the products are identical and they are produced in large quantities. Job order costing deals with unique products that cannot be standardized.