Asked by: Faouzia Novellaspersonal finance financial planning
How does a job costing system differ from a process costing system?
Then, what is a process costing system?
Process costing is a term used in cost accounting to describe one method for collecting and assigning manufacturing costs to the units produced. A processing cost system is used when nearly identical units are mass produced.
Similarly, you may ask, what are the differences between the two costing methods?
In the field of accounting, variable costing (direct costing) and absorption costing (full costing) are two different methods of applying production costs to products or services. The difference between the two methods is in the treatment of fixed manufacturing overhead costs.
Job order costing records the actual materials and labor expenses for specific jobs, and assigns overhead to jobs at a pre-determined rate. Process costing applies costs to departments based on the average number of units produced per day.