Job Costing vs Process Costing

Job Costing System vs. Process Costing System

Our global economy dictates that every business, both for profit or non-profit, remain competitive. “To be competitive, the firm needs accurate cost information – for product pricing, profitability analysis of individual customers, evaluation of management performance, and refinement of strategic goals” (Blocher, Stout, Juras, & Cokins, 2016, pp. 97-98) Bloucher, et al further states that both timely and accurate manufacturing cost is essential for effective management of manufacturing cost.

Job costing involves detailed calculation of production cost for customized and unique production, special orders, standard products produced in batches. Record keeping is more detailed and customer billing is common. All material and labor cost are tracked per job, order or per client and cannot be transferred from one process to another. Jobs usually involve small production runs.

Several local businesses in the Daytona Beach area uses job costing. One such example of is Halifax Health. It offers medical services to residents of East Central Florida and has been opened since 1928. “It is the area’s largest healthcare provider with a tertiary and community hospital.” (Our History). According to Blocher, et al, service industries use job costing (Blocher, Stout, Juras, & Cokins, 2016, p. 106). Hospitals use the term case instead of job and “the primary focus is on direct labor” (Blocher, Stout, Juras, & Cokins, 2016, p. 106). A detailed hospital bill will itemize the cost per medicinal dosage, time in the hospital, medical procedures and supplies used, the time (labor) of the attending medical staff and numerous other costs (Lister, 2016)

Another local example using job order costing is KB Homes. KB Homes began in 1957 and they have trademarked the “built to order process” (KB Homes - History of Quality). This process involves choosing the community to live in, the specific floor plan, customizing the interior,...