how are costs allocated differentlyk between job order costi

how are costs allocated differentlyk

between job order costing and process costing

Solution

ANSWER:

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. The costs are allocated differently between job order costing and process costing:

-- Process costing systems calculates unit costs by department. On the other hand Job- order costing systems calculate unit costs by job on the job cost sheet

-- Process costing systems accumulate costs by department whereas Job- order costing systems accumulated costs by single jobs

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.