Job Order Costing and Process Costing Examples

What is job order costing? and what is process costing? what is the difference between job order costing and process costing? and which industries use job order costing and which use process costing? Let’s find out

What is Job Order Costing?

An accounting system that assigns costs to products that are produced for specific jobs.

we use it for customized products and we assign the cost by calculating the cost of each job, the cost cannot be transferred and since each job is different from another, all the products have their individuality.

the process is suitable for industries that customize products based on customers’ demands.

In JOC losses cannot be segregated, and it is used for small production units.

What is Process Order Costing?

Process costing is that form of operation costing which is used to ascertain the cost of the product at each process or stage of manufacturing.

Process costing is used for standardized production and when it comes to cost assignment in this case, is first determined based on the process and then decided based on the units produced.

the cost calculation is done based on the process and the cost can be transferred from one process to another.

Products are produced in large volumes, and consequently, therefore, they do not have any individuality.

Process costing is suitable for industries where mass production is possible, losses can be bifurcated based on the process.

Process costing is used for large production units.

What are some examples of companies that use JOC?

An example of JOC would be dell company, if you order a dell computer online then you customize that computer you tell them everything you want.

Companies that use Job Order Costing:

1. Furniture Companies
2. Interior Decoration Companies
3. Shipbuilding Companies
4. Movies Companies

What are some examples of companies that use Process Costing?

Coca-Cola Is a big example of process costing because when you think about Coca-Cola they are producing cans and Coca-Cola cans aren’t fully customizable, it’s a process.

Soda cans are all the same and there is no need to customize them and they produce mass amounts of soda cans, and that is why they use process costing.

Companies that use Process Costing:

1. Soap Companies
2. Paint Companies
3. Cold drinks Companies
4. Snacks Companies

What is the difference between job order costing and process costing?

So the difference between job order costing and process costing is that the JOC he’s more into custom items note that it’s not necessary to be fully custom but when you are talking about customized items or products you have to use the JOC And when you think about job order costing three points must come to your mind

1. custom
2. Low production
3. High flexibility

But if you want to think about process-costing then another three points must come to your mind which is:

1. Repetitive
2. High production
3. low flexibility

So the point is if you want to reduce the same product without changing anything about it then you have to use the process costing but if you are customizing your iTunes and do you want to produce each item in a different way depends on what the customer needs then you have to use the job costing system.