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 primary costing methods used in manufacturing and service industries. While they have significant differences, the flow of costs remains the same in both systems, following the same general path: Raw Materials Inventory → Work in Process Inventory → Finished Goods Inventory → Cost of Goods Sold.
Differences Between Job Order Costing and Process Costing:
- Documents Used to Track Costs (Option A)
- Job Order Costing: Uses job cost sheets to track costs for individual jobs or orders. Each job is unique and assigned specific materials, labor, and overhead costs.
- Process Costing: Uses departmental production reports, tracking costs by process or department rather than by individual job.
- Point at Which Costs Are Totaled (Option B)
- Job Order Costing: Costs are accumulated when a specific job is completed. Each job has distinct cost accumulation.
- Process Costing: Costs are accumulated at the end of a production period (e.g., monthly) for each process or department.
- Unit Cost Computations (Option C)
- Job Order Costing: Unit costs are determined by dividing total job costs by the number of units produced in that job.
- Process Costing: Unit costs are computed by dividing total process costs by the number of units completed during the period.
- Flow of Costs (Option D – Incorrect Choice)
- The cost flow remains the same in both systems, moving from raw materials to finished goods to cost of goods sold.
Thus, the primary differences lie in tracking, accumulation, and unit cost computation—not in the flow of costs.