Differences between a job order cost system and a process cost system include all of the following except the
a.documents used to track costs.
b.point at which costs are totaled.
c.unit cost computations.
d.flow of costs.
The correct answer and explanation is :
The correct answer is:
d. flow of costs.
Explanation:
A job order cost system and a process cost system are two different methods used in cost accounting to track and allocate manufacturing costs. While they have distinct characteristics, the flow of costs remains the same in both systems.
Key Differences Between Job Order Costing and Process Costing:
- Documents Used to Track Costs (Option A)
- In a job order cost system, costs are tracked using job cost sheets, which record direct materials, direct labor, and overhead for each specific job or order.
- In a process cost system, costs are tracked using departmental production reports, as costs are accumulated for each process or department rather than individual jobs.
- Point at Which Costs Are Totaled (Option B)
- In a job order system, costs are totaled at the completion of each job since each job is unique.
- In a process cost system, costs are accumulated at the end of each accounting period for each process, as production is continuous.
- Unit Cost Computations (Option C)
- In a job order cost system, unit costs are computed by dividing the total job cost by the number of units produced in that job.
- In a process cost system, unit costs are determined by dividing total departmental costs by the number of units produced during the period.
- Flow of Costs (Option D) – The Incorrect Answer
- Both cost systems follow the same flow of costs: Direct materials, direct labor, and manufacturing overhead are accumulated in Work-in-Process Inventory, then transferred to Finished Goods Inventory, and finally recorded in Cost of Goods Sold when products are sold.
Since both systems follow the same fundamental cost flow, Option D is incorrect as a distinguishing factor.