Costing

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PROCESS COSTING VS JOB ORDER COSTING

Job order costing trails the prime costs to allocate direct material and direct labour to a distinct product. At the same time, process costing also trails prime costs to allocate direct material and direct labour to each manufacturing department (Argade, 2020). For instance, Ford Motor Company, listed in New York Stock exchange, also applies process and job order costing. The company does not find it quite easy in merchandising as they must account for every material, labour, and other manufacturing cost used in making the product—for instance, the Ford Fiesta manufactured by Ford Motor company.

Therefore, Ford Motor Company uses a job-order costing to ensure all revenues and costs for each model can be easily differentiated from other models produced by the same company and recorded. The costs are traced and divided by the number of units in each model to evaluate the cost per model (Pollard, 2018). Additionally, the predetermined overhead costs are applied in determining the overheads work in progress for each product.

Hence, I would also choose Job order costing since the company produces different types of cars, which are differentiated into various models that meet the requirement of various customers. The system also used to assign cost customers who might want special orders of customed vehicles. On the other hand, the company could also use process costing in manufacturing identical models (Vanderbeck, 2012). The costing system used depends on whether the company can trace the cost incurred in manufacturing a single product model. Hence, Ford Motor company can use job order costing systems for t operations and process costing in assigning costs to special orders from customers.

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