Question

What are the major differences between job-order costing and process-costing systems? Give an example of a well-known company that might use job-order costing, and an example of a well-known company that might use process costing. Explain why you have chosen these companies.

Answer 1

The major difference between job costing and process costing is that :

Job costing is used by the organisations which are providing different type of service or manufacturing different type of product. None of the product produced are of same process . So for every product a different job sheet has to be created. Firms like E&Y uses these methods because they have different types of clients and every client have their different requirements.

Process costing is used by the organisations which are producing same type of products over a period of time. They use process costing because they have to follow the same process again n again. Cost is divided among processes. This form of costing is used by big garments manufacturing company like Levi's because they use the same process for every product they manufacture.