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Job Costing

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When are companies likely to use a job costing system or process costing system? Describe the specific characteristics of each system and provide several examples (i.e. at least two) from companies in your community for each system (i.e. at least four companies should be described).

Companies use both job costing system and process costing systems. It is important to understand the differences in the two systems. According to Blocher (2013), a job costing system is a product costing system in which it collects and assigns certain costs to a specific job. A process costing system differs in that it collects product or service costs by process or department and then assigns them to a large number of similar or nearly identical products.

According to Goss (2003), the easiest way for costing is to average all the indirect costs and allocate them. This would be an example of a process costing system. Some local companies are Dixie Brick and Coca-Cola. Dixie Brick is a company that develops brick blocks for local construction companies. Since the company produces a mass amount of bricks it is best to use the process costing system. It would not be beneficial to assign a different price to differing bricks. Coca-Cola is also a company that produces nearly similar products and sells the products for the same price. Different ingredients are used in the different flavors of products. The products are still similar enough that it would not make sense to assign different prices for the differing flavors. Winicur (1993), writes that a process cost system typically has the following four characteristics. The costs are accumulated within a department, they are accumulated for a time period rather than for finished jobs, many work in process accounts are used, and the completed costs from each department become the raw materials cost for the subsequent department.


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