Job Costing vs 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.

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.

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.

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 costing 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.

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 where mass production 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 costing 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.

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 computerized accounting systems.

This article has been a guide to Job Costing vs. Process Costing. Here we discuss the top differences between job costing and process costing, infographics, and a comparison table. You may also have a look at the following articles –

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