Difference Between Job Costing and Process Costing

There are various cost accounting techniques used to measure the cost of the product. When the goods are produced only against special orders, job costing is used by firms. On the other hand, when a product passes through several processes or stages, the output of one process becomes the input of next process, and to determine the cost of each process, process costing method is applied. It is generally used when like units are to be manufactured, that too in a continuous flow.

In other words, the former is used to calculate the cost of jobs or contracts which are distinct in nature, while the latter used to compute the cost charged to each process. So, here in this article excerpt, we present all the differences between Job Costing and Process Costing, in a tabular form.

Content: Job Costing Vs Process Costing

1. Comparison Chart
2. Definition
3. Key Differences
4. Conclusion

Comparison Chart

Basis for Comparison	Job Costing	Process Costing
Meaning	Job costing refers to calculating the cost of a special contract, work order where work is performed as per client's or customer's instructions.	A costing method, in which the costs which are charged to various processes and operations is ascertained, is known as Process Costing.
Nature	Customized production	Standardized production
Assignment of cost	Calculating cost of each job.	First of all, cost is determined for the process, thereafter spread over the produced units.
Cost Center	Job	Process
Scope of cost reduction	Less	High
Transfer of Cost	No transfer	Cost is transferred from one process to another
Identity	Each job is different from another.	Products are manufactured consecutively and so they lose their identity.
Cost Ascertainment	Completion of the job.	End of the cost period.
Industry type	Job costing is suitable for the industries which manufactures products as per customer's order	Process costing is perfect for the industry where mass production is done.
Losses	Losses are usually not segregated.	Normal losses are carefully ascertained and abnormal losses are bifurcated.
Work-in-progress (WIP)	WIP may or may not exist at the beginning or at the end of the financial year.	WIP will always be present in the beginning or at the end of the accounting period.

Definition of Job Costing

A method of costing in which cost of each ‘job’ is determined is known as Job Costing. Here job refers to a specific work or assignment or a contract where the work is performed according to the customer’s instructions and requirements. The output of each job consists of normally one or less of units. In this method, each job is considered as a distinct entity, for which cost is ascertained. Job Costing is applied when:

• The execution of the jobs is on the basis of client’s specification.
• All the jobs heterogeneous in many respects and each job require separate treatment.
• There is a difference in WIP (Work in progress), of each period.

Job Costing is best suited for the industries where specialized products are manufactured as per customer needs and demands. Some examples of those industries are Furniture, Ship Building, Printing Press, Interior Decoration, etc.

Definition of Process Costing

A costing technique, which is used to calculate the cost of each process is known as Process Costing. Here process refers to a separate stage where production is performed to convert the raw material into an another identifiable form. Process Costing is used in the industry where identical products are produced in huge quantities.

In Process costing, the plant is divided into some processes where the production is performed either sequentially, parallelly or selectively. The output of the former process becomes the input of the latter process, and at the end, the output of the last process is the final product. The individual process account is prepared for each process.

Process Costing is best suited for large-scale production is done as well as where there are multiple levels of producing a product. Some example of such industries is steel, soap, paper, cold drink, paints, etc.

Conclusion

There is no comparison between Job Costing and Process Costing because both the methods are used in different industries. Although, the differences exist in the two methods. One such difference is, each job requires a high degree of supervision and control, but the process does not require so, as they are standardized in nature.