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Accounting
Accounting
Job order costing and process costing are two methods used in managerial
accounting to calculate the cost of producing goods or services.
Job order costing is used when products or services are unique, customized,
or produced in small batches. It involves tracking and accumulating costs for
each specific job, project, or order. Examples of industries that commonly use
job order costing include construction companies, custom furniture
manufacturers, and printing companies. In job order costing, costs are directly
attributed to specific jobs, allowing for accurate cost allocation.
On the other hand, process costing is used when products or services are
produced in a continuous and repetitive manner, typically in large quantities. It
involves averaging and allocating costs over a particular production process
or department. Industries such as oil refining, chemical manufacturing, and
food processing often employ process costing. In process costing, costs are
distributed evenly across all units produced within a specific time period,
resulting in an average cost per unit.
In simpler terms, the main difference between job order costing and process
costing can be summarized as follows: