What is the Difference Between Job Costing & Process Costing?

Job costing and process costing are two accounting methods for assigning costs to goods or services. Job costing usually assigns a cost to each job based on the actual resources consumed, while process costing calculates an average cost for each unit produced.

Cost Assignment

Job costing assigns costs to each job, while process costing assigns cost by department.

Use

According to Cal Poly Pomona University's website, job costing works best for small quantities of unique items, while process costing is best for a large quantity of identical or very similar goods or services.

Process Costing

Cal Poly Pomona lists five steps for process costing: summarize the flow of physical units of output, calculate output in terms of equivalent units, determine equivalent-unit costs, summarize total costs and assign total costs to units completed and to ending work in process.

Job Costing

Texas Wesleyan University gives seven steps for job costing, ranging from identifying the job, determining direct and indirect costs and allocating all costs properly.

Considerations

Typically, job costing uses skilled labor, has short production runs and uses different materials from order to order. Typically, process costing uses unskilled labor, has long production runs and uses the same materials for every order.

References

• West Virginia University: Lecture on Costing
• Cal Poly Pomona: Process Costing
• Texas Wesleyan University: Job Costing