ACC 350 Week 5 Discussion

Professor and Class, Job-order costing and process costing are methods used to determine unit product costs. Job-costing is used when some several different jobs or products are being worked on each period (1). Industries such as furniture manufacturing and many service organizations use job-order costing. Process costing is used more commonly in those industries that convert raw materials into similar products. Some examples are bricks, soda, or paper, and these are produced either continuously or for long periods. Both of these systems have the same primary purpose, which is to assign material, labor, and manufacturing overhead costs to products and provide a way for computing unit product costs (1). Both of these systems use the same manufacturing accounts, and the flow of costs through these accounts are basically the same. There are differences as well between the two systems. With job-order costing, many different jobs are worked on during each period, and each of the jobs has a unique production requirement. With process costing, a single product is produced for either a continuous basis or for long periods. Unlike job-order costing, all units of product are identical under process costing. With job-order costing, the costs are accumulated by individual jobs. Costs are accumulated by department with process costing. Lastly, unit costs are computed by job on the job cost sheet, whereas unit costs are computed by department with process costing. Cost accumulation is easier in a process costing system than it is in a job-order costing system. With a process costing system, the costs are assigned to a few processing departments rather than hundreds of different jobs like with a job-costing system. With a process costing system, a separate Work in Process account is maintained for each processing department. In contrast, with a job-order costing system, the entire company may have only one Work in Process account. Under a process costing system, the materials labor and overhead costs can be added in any processing department. With a process costing system and job-order costing system, a materials requisition form is used to bring in the materials from the storeroom. In process costing, labor costs are traced to departments rather than individual jobs. In both systems, predetermined overhead rates are customarily used. Manufacturing overhead cost is applied according to the amount in the allocation base. Once all the processing is complete in a department, the units are then transferred to the next department for further processing. After processing has been completed, the costs of the completed units are then transferred to the Finished Goods inventory

account. When a customer's order has been fulfilled, and the units have been sold, the cost of the units is transferred to COGS. The cost flows between accounts are basically the same with both systems. The main difference is that each department has a separate Work in Process account in a process costing system. Rebekah

1. Garrison, R. H., Noreen, E. W., & Brewer, P. C. (2018). Managerial accounting (16th ed.). Boston, MA: McGraw-Hill