The Differences in Product and Process Costing
- Similarities with job-order and process costing are the way the cost flow through the system. Both cost types use work in progress, raw material and finished product accounts to add the overhead cost. Material starts as Raw Material and is then tranferred to Work in Progress as it is turned into the finished sellable product. At which time it is then moved from Work in Progress to Finished Products Account.
- The major differences in these two types of cost assignment is that job-order provides cost for each job order and process costing takes all the costs of each processing department and spreads the cost over all production for the period. Different types of cost assignment works well with different company types. Process costing works well with a company that sells and makes a uniform type of product, like a sugar company. On the other hand, job order works well for companies that sell and make multiple types of products, like a cereal company with many different types of cereal.