Module 02 Discussion 2 - Job Order and Process Costing

Review the main differences between job order and process costing. What variables might a company consider before choosing one of these methods? Give an example of a company that uses job order costing. Give an example of a company that uses process costing.

Please make your initial post by midweek, and respond to at least one other student's post by the end of the week.

Student's Post to reply too:

Hello,

The main difference between job costing and process costing is the manner in which the cost is calculated. For large standard jobs, process costing is used. For smaller and more unique jobs, a job costing method is used.

An assembly line that produces 2x4s would use process costing. The cutting of this wood is all standard and made the same. An order for 2x3s and 1x3s (less commonly used sizes) would call for a job costing method because the order is more specific.

When deciding which method to use, variables to consider would include how often a product is produced, how much (quantity) is needed to be produced and how standard is the end product being produced. Job costing is used for unique items whereas process costing is used for more standard items.

An additional consideration for which method to use would be for billing a customer. Using job costing allows for a breakdown of all costs for the customer to see. For this reason, the job costing method would be used when giving a bill to a customer.

Custom made pieces use job orders and bulk or production line pieces use the process costing method. Lockheed Martin uses a job costing system because their products are generally unique and require many parts to be accounted for.

The Chevron Corporation uses the process costing system for the production of their petroleum products as the product is mass produced and the end product is all the same.