Question

how are costs allocated differently between job order costing and process costing?

Answer 1

Cost Accumulation refers to the process of recognizing and recording costs as they occur. There are two types of cost accumulation methods namely: job costing and process costing.

Job costing can be defined as a process of calculating the cost of a special contract, work order where work is performed as per client's or customer's instructions. Process costing method can be defined as a process in which the costs which are charged to various processes and operations is ascertained.

Thus job-order costing allocates costs to products which are identified by individual units or batches. On contrary process costing averages costs over big numbers of nearly homogeneous products. As a result job costing is used when products are manufactured based on orders that are customer-specific and process costing is used to allocate costs in the environment of standardized manufacturing.