lOMoARcPSD|255728 27
Running head: DB 2 – JOB COSTING AND PROCESS COSTING SYSTEMS 1
Discussion Board – Job Costing Systems vs. Process Costing Systems
Liberty University
lOMoARcPSD|255728 27
DB 2 – JOB COSTING AND PROCESS COSTING SYSTEMS
2
Discussion Board – Job Costing Systems vs. Process Costing Systems
When are companies likely to use a job costing system or process costing system?
Job costing as defined in our text “is a costing system that accumulates costs and assigns
them to specific jobs, customers, projects, or contracts” [CITATION Blo19 \p 106 \l 1033 ]. Job
costing systems are likely to be used in companies that are producing unique products or
providing a unique service [ CITATION Lum \l 1033 ]. Job costing can be used in the
manufacturing industry for clothing factories, air craft companies, construction companies,
landscaping companies, and food companies among others. However, it can also be used for the
service industries as it has been used by hospitals, law and accounting firms, and even in the
entertainment industry. The characteristics of job costing include the job cost sheet, direct and
indirect materials costs, factory overhead costs, and direct and indirect labor costs [ CITATION
Blo19 \l 1033 ]. The job cost sheet serves as the record and summary of the cost of direct
materials, direct labor, and factory overhead for the given job.
“Process costing is a product costing system that accumulates costs according to
processes or departments and assigns them to a large number of nearly identical products”
[CITATION Blo19 \p 180 \l 1033 ]. Companies are likely to use process costing if they are
producing products that are similar or identical units of a product created using a consistent
process [ CITATION Lum \l 1033 ]. Organizations that may use process costing are candy
companies, soda companies, chip producers, phone manufacturers, and gas companies. The
characteristics of process costing systems are product and customer profitability and pricing,
product mix, and process improvement decisions [ CITATION Blo19 \l 1033 ].
lOMoARcPSD|255728 27
DB 2 – JOB COSTING AND PROCESS COSTING SYSTEMS
3
Describe the specific characteristics of each system and provide several examples (at
least two) from companies in your community for each system (at least four companies
described).
Bradley, Drendel, and Jeanney is a local law firm. When I was in an accident back in
2015, Bill Bradley represented me. I can remember from my invoices that I received as we
started to receive some settlements on my suit, that they were itemized specially for the work,
time, and resources used while his firm was working my case. Job costing is a good costing
system for law firms because lawsuits are not a one-size fits all. Every case and every client are
different and unique and may require different things making job costing an ideal match.
Hospitals are another good example of organizations using job costing. Hospitals can use job
costing to help bill patients. Every patient is unique and may come to the hospital or doctor’s
office for any number of reasons. Using job costing can assist with billing each patient and the
patient’s insurance for the purpose of the visit and the cost of the services rendered [ CITATION
Lis19 \l 1033 ]. The National Council for Juvenile and Family Court Judges (NCJFCJ) is a local
non-profit organization. I worked for this non-profit back in 2015. Because the NCJFCJ thrived
off grants that it received in order to pay its employees, all employees had to report how many
hours were spent working on tasks for the specific grant. So, if you spent 2 hours working on
one grant and four hours working on another, your timesheet should reflect a total of six hours
under those respective grants. The employee’s timesheets were then submitted to the accounting
department who would put together the job sheets for each grant to record how the money for
that grant was spent.
Maverick Gas Station is an example of a process costing system. Oil refineries mass
produce gas for distribution nationwide. The qualify and grade of the oil is refined using the
lOMoARcPSD|255728 27
DB 2 – JOB COSTING AND PROCESS COSTING SYSTEMS
4
same process allowing for it to be produced using a consistent method. This makes it easier for
the oil to refined in large quantities and distributed. Another company that uses process costing
is Great Basin Brewery. Great Basin Brewery is a local beer manufacturer who sells its beers to
the public. You can go to the brewery (also a restaurant) and drink the beer there or you can also
buy packs of beer from them or at local stores. Drug companies also benefit from process
costing. Drug companies are tasked with producing mass orders of drugs that help people in
various ways. In 2013 Mayo News Releases estimated that nearly 70 percent of Americans are
on at least one prescription drug (para. 2). To ensure that the needs of the customers are being
met, drug companies must be able to produce massive amounts of the same drugs.
lOMoARcPSD|255728 27
DB 2 – JOB COSTING AND PROCESS COSTING SYSTEMS
5
References
Anta, D. G., & Iacob, M. I. (n.d.). Job-Order Costing Versus Process Costing. Universitatea
Aurel Vlaicu, 213-218. Retrieved from http://citeseerx.ist.psu.edu/viewdoc/download?
doi=10.1.1.523.3194&rep=rep1&type=pdf
Blocher, E. J., Stout, D. E., Juras, P. E., & Smith, S. D. (2019). Cost Management: A Strategic
Emphasis (8 ed.). New York, New York: McGraw-Hill Education.
Lister, J. (2019, March 6). What Kind of Businesses Can Use Job Costing? Retrieved from Small
Business Chronical: https://smallbusiness.chron.com/kind-businesses-can-use-job-
costing-38870.html
Lumen Learning. (2015). Comparison of Job Costing with Process Costing. Retrieved from
Lumen Learning: https://courses.lumenlearning.com/acctmgrs/chapter/4-1-comparison-
of-job-costing-with-process-costing/
Mayo News Releases. (2013, June 19). Nearly 7 in 10 Americans Take Prescription Drugs,
Mayo Clinic, Olmsted Medical Center Fin. Retrieved from Mayo Clinic News Network:
https://newsnetwork.mayoclinic.org/discussion/nearly-7-in-10-americans-take-
prescription-drugs-mayo-clinic-olmsted-medical-center-find/
