Distinguish between job costing, process costing, and operations costing.Give an example of a company that would use each.

Question

What will be an ideal response?

Answer 1

Job costing treats each individual job as a unit of output and assigns costs to each job as the resources are used. Each job has a separate accounting record. Construction, movies, and airplanes would be examples of products that would use job costing. Job costing should be used whenever it is important to distinguish the cost of specific units from one another because there are differences in materials, labor, or other costs.
Process costing treats all the units processed during a time period as the output and does not separate and record costs for each unit produced. There is no expected cost variation in the individual units, so trying to separate them is of little value. Process costing would be used by food and soft drink manufacturers, oil companies, and paint manufacturers. Operations costing is a hybrid of job and process costing. It is used where companies produce large batches of similar products where significantly different kinds of materials are used. A car manufacturer or a computer manufacturer who custom fits each computer to order may use operations costing.