ACC 117 Lecture Notes - Lecture 12: Cost Driver, Finished Good, Income Statement
Document Summary
Process costing is used by companies that make standardized or homogeneous products or services. The basic process costing formula is: average unit cost = total cost / total units produced. Job order costing is used in companies that offer customized or unique products or services. Unlike process costing, in which each unit is identical to the next, companies use job order costing when each unit or customer differs from the next. (custom homes, royal wedding gown, audits, etc. ) Job order costing can also be applied to service companies that serve clients or customers with unique needs. (law firms, architects, medical professions, etc. ) Auto manufacturers and other companies often use a hybrid cost system called operations costing, which is a blend of process costing (for the common processes) and job order costing (for the unique components). If you understand both job order and process costing, you will be able to understand operations costing.
