How is job costing in a service firm different from job costing in a manufacturer

Difference Between Job Costing and Process Costing

In case of the Job Costing, costs of the customized or the special contract are calculated where the work is done according to the instructions of the specific client of the company, whereas, in the case of the Process costing, the cost is charged to a different process of the company is determined.
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Difference Between Job Costing and Process Costing
What is Job Costing?
What is Process Costing?
Job Costing vs. Process Costing Infographics
Key Differences
Job vs. Process Costing Comparative Table
Recommended Articles
How job costing is used in service sectors and manufacturing sectors?
What is the difference between job costing and job order costing?
What is job costing in manufacturing?
What is the difference between job costing?

Job costing is each job carried out during an assignment or project. Whereas process costing is the total cost of the processes carried out in the entire project.

What is Job Costing?

A method that calculates the cost of every ‘job’ is called Job Costing. Job refers to a contact or a project where the work is conducted based on customers’ needs and requirements. The output usually is one unit or less. Each job is considered an isolated project and a distinct entity for

Based on the client’s requirements.
No job is the same and is heterogeneous, and each job will have to be done in a manner required to satisfy each job.
The difference in work in progress exists in each period.

It is best suited for industries where products are made per customers’ demands. Examples of these industries are – Furniture, Interior Decoration, and Shipbuilding.

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For eg:
Source: Job Costing vs Process Costing (wallstreetmojo.com)

What is Process Costing?

A method that calculates the cost of every ‘project; is termed Process Costing. The process can be defined as a separate stage where the raw material is converted to another form. Process costingProcess costing is a method of costing wherein the products go through two or more processes and the costs are assigned/charged to individual operations averaged over the number of units produced during that time. It is used commonly in manufacturing units like paper, steel, soaps, medicines, vegetable oils, paints, rubber, and chemicals.read more is used for industries with a vast volume of similar products.

In process costing, the entire process is divided into small processes where the work is performed in a waterfall manner, parallelly or even sequentially. Individual processes sum up all the processes. The output of one process is the input for another process. And at the end of the process, the final output or product is created.

Process costing is suited for large production where there are different levels of producing a product. Examples include soap, paint, cold drinks, and snacks.

Job Costing vs. Process Costing Infographics

Key Differences

The critical differences between are as follows –

In job costing, the cost is calculated after completing the job. However, in process costing, the cost of each job is determined.
Job costing is used in cases where products produced are unique, and process costing is used for the standardized products produced.
In a job, casting losses can be segregated, but in the case of later, losses are bifurcated on the bases of processes.
Transfer cost is not considered in job costing when the job is shifted from one assignment to another. In the case of process costing, the cost of the previous processing stage is transferred to the next processing stage.
There is less scope of cost reduction in job costing, whereas, for process costing, there is a higher scope of cost reduction.
Job costing is suitable for industries that design and produce products based on the customer Process costing is useful for industries whereMass production is defined as the manufacturing of goods on a large scale without compromising on the quality.read more mass productionMass production is defined as the manufacturing of goods on a large scale without compromising on the quality.read more is possible.
In job costing, WIP may or may not be present, but for process costing, WIP may be present at the beginning and end of the period.
Special treatment is required for each job in job costing, whereas in process costing, there is no need for special treatment for each process.
Job costingJob costing is the process of determining the cost of a job or work, which helps in the analysis of the applicable per unit cost of each job in the overall production. A job can be defined as a specified task, contract, or batch that is completed to achieve a specific goal.read more each job is different from another, so it has individuality. But, later, products are produced in large volume, and consequently, it does not have individuality.
In job costing, the time and materials are considered while calculating the cost of the job, so recordkeeping is an important and tedious task. Whereas in the process of casting, the cost is aggregated, so record keeping is an easy
Job costing makes the billing process easier for customers as well as the owners since the details of the exact costs are possible to be specified.

Job vs. Process Costing Comparative Table

Particulars	Job Costing	Process Costing
Meaning	Job costing is the cost of a particular assignment or contract where work is done based on the client’s needs and instructions.	Process Costing is the cost calculated based on various processes.
Production	Customized;	Standardized;
Assignment	Calculating the cost of each job	The cost, in this case, is first determined based on the process and then decided based on the units produced.
Cost Calculation Basis	The cost calculation is done based on Job.	The cost calculation is done based on Process.
Reduction in Cost	There are fewer scopes of reduction in costs.	There is a higher scope of reduction in costs.
Cost Transfer	The cost cannot be transferred.	The cost can be transferred from one process to another.
Individuality	Since each job is different from another, all the products have their individuality.	Products are produced in large volumes; consequently, they do not have any individuality.
Industry	This process suits industries that customize products based on customers’ demands.	This process is suitable for industries where mass production is possible.
Losses	Losses cannot be segregated.	Losses can be bifurcated based on processes.
WIP(Work In Progress)	WIP may or may not exist	WIP in this process will always be present at the beginning and end of the period.
Examples	Furniture, Interior Decoration, and Shipbuilding.	Soap, paint, cold drinks, snacks;
Size of Job	Used for small production units;	Used for large production units;
Record Keeping	For job costing, record keeping is a tedious task.	For process costing, recordkeeping is an efficient task.

Conclusion

As job and process costing is used in different industries, there cannot be any comparison between them. Although the methods are different, the main difference can be that job costing requires a higher degree of supervision, but process costing does not need so.

There are also situations where a company can have both. For example, a company produces a large quantity, but changes or customizes the products before sending them to the client or customers. In this case, both the elements of costing are used; this is also termed a hybrid system. Both these processes can be used in manual and computerizedAccounting systems are used by organizations to record financial information such as income, expenses, and other accounting activities. They serve as a key tool for monitoring and tracking the company's performance and ensuring the smooth operation of the firm.read more accounting systemsAccounting systems are used by organizations to record financial information such as income, expenses, and other accounting activities. They serve as a key tool for monitoring and tracking the company's performance and ensuring the smooth operation of the firm.read more.

How job costing is used in service sectors and manufacturing sectors?

Manufacturers and service organizations often use job order costing to track direct labor costs. Job order costing is a system companies use when they can trace costs to a specific product or service. It allows managers to accumulate costs by jobs instead of departments.

What is the difference between job costing and job order costing?

Job costing, also known as job order costing, and process costing are cost accounting systems designed to help businesses keep track of all the costs they have to pay to produce a product or deliver a service. The type of costing method you use depends on the type of business you're running.

What is job costing in manufacturing?

Job costing is a systemized way of tracking and monitoring production expenses, with each “job” representing an order from a customer. In this way, companies can produce larger or smaller quantities of finished goods while keeping production within predictable costs.

What is the difference between job costing?

Job costing is the cost of a particular assignment or contract where work is done based on the client's needs and instructions. Process Costing is the cost calculated based on various processes. The cost, in this case, is first determined based on the process and then decided based on the units produced.