Job Cost Sheets Can Provide Information to Managers for All Except

Learning Objective

1. Compare and contrast chore costing and process costing.

Question: A process costing system is used by companies that produce similar or identical units of production in batches employing a consistent process. Examples of companies that use procedure costing include Chevron Corporation (petroleum products), the Wrigley Visitor (chewing gum), and Pittsburgh Paints (paint). A chore costing system is used by companies that produce unique products or jobs. Examples of companies that use job costing systems include Boeing (airplanes), Lockheed Martin (avant-garde engineering systems), and Deloitte & Touche (accounting). What are the similarities and differences betwixt job costing and process costing systems?

Answer: Although these systems accept marked differences, they are too similar in many ways. (Every bit you read through this section, refer to Chapter 1 "What Is Managerial Bookkeeping?" for a review of important terms if necessary.) Remember the three inventory accounts that accountants use to track product toll information—raw materials inventory, piece of work-in-process inventory, and finished appurtenances inventory. These three inventory accounts are used to record product toll information for both process costing and job costing systems. However, several work-in-process inventory accounts are typically used in a process costing system to track the menses of product costs through each product department. Thus each department has its ain piece of work-in-process inventory account. (For the purposes of this chapter, presume each department represents a production process. This explains the term procedure costing considering we are tracking costs past process.) The sum of all work-in-procedure inventory accounts represents total work in process for the company.

Recall the three components of production costs—direct materials, direct labor, and manufacturing overhead. Assigning these product costs to individual products remains an important goal for procedure costing, just as with job costing. Withal, instead of assigning production costs to individual jobs (shown on a job cost sheet), process costing assigns these costs to departments (shown on a departmental production cost report).

Effigy 4.i "A Comparison of Cost Flows for Task Costing and Process Costing" shows how product costs catamenia through accounts for job costing and process costing systems. Table 4.ane "A Comparison of Process Costing and Chore Costing" outlines the similarities and differences between these two costing systems. Review these illustrations advisedly before moving on to the next section.

Figure four.one A Comparison of Price Flows for Job Costing and Process Costing

Tabular array four.1 A Comparison of Process Costing and Job Costing

Product Costs
Similarities	Product costs consist of direct materials, direct labor, and manufacturing overhead.
Differences	Process Costing	Chore Costing
	Production costs are assigned to departments (or processes).	Production costs are assigned to jobs.
Unit Price Data
Similarities	Unit cost data is needed by management for controlling purposes.
Differences	Process Costing	Job Costing
	Unit cost information comes from the departmental production cost report.	Unit cost information comes from the job cost sheet.
Inventory Accounts
Similarities	Inventory accounts include raw materials inventory, work-in-process inventory, and finished goods inventory.
Differences	Process Costing	Job Costing
	Several different work-in-process inventory accounts are used—one for each department (or process).	One piece of work-in-process inventory business relationship is used—chore cost sheets track costs assigned to each job.

Business organization in Action four.1

The Product Process at Coca-Cola

The Coca-Cola Company is one of the world'south largest producers of nonalcoholic beverages. According to the company, more than 11,000 of its soft drinks are consumed every 2nd of every 24-hour interval.

In the first stage of product, Coca-Cola mixes direct materials—water, refined sugar, and secret ingredients—to brand the liquid for its beverages. The second stage includes filling cleaned and sanitized bottles before placing a cap on each bottle. In the third stage, filled bottles are inspected, labeled, and packaged.

Work in process begins with the first stage of production (mixing and blending), continues with the second stage (bottling), and ends with the 3rd stage (inspecting, labeling, and packaging). When products accept gone through all three stages of product, they are shipped to a warehouse, and the costs are entered into finished goods inventory. Once products are delivered to retail stores, product costs are transferred from finished goods inventory to cost of goods sold.

Cardinal Takeaway

• A process costing system is used by companies that produce similar or identical units of product in batches employing a consistent procedure. A job costing system is used past companies that produce unique products or jobs. Procedure costing systems track costs past processing department, whereas job costing systems rail costs by job.

Review Trouble 4.i

Identify whether each business listed in the following would use job costing or process costing.

1. Trash bag manufacturer
2. Custom piece of furniture manufacturer
3. Shampoo manufacturer
4. Automobile repair store
5. Sports drinkable manufacturer
6. Antique gunkhole restorer

Solution to Review Problem iv.1

1. Process costing
2. Job costing
3. Process costing
4. Task costing
5. Process costing
6. Job costing

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Source: https://courses.lumenlearning.com/acctmgrs/chapter/4-1-comparison-of-job-costing-with-process-costing/

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