Explain the difference between job costing and product costing.


Explain the difference between job costing and product costing.

Cost Accounting

Cost accounting is a discipline of managerial accounting in which the goal is to calculate a business's total cost of production. Total cost of production include direct materials, direct labor. and overhead. Overhead includes factory rent, supervisor salary, depreciation on machinery, and more. Cost accounting is used to help management make sound business decisions regarding the operations of the business.

Answer and Explanation:

Job costing and product costing have many differences.

Job Costing

Job costing is used for unique or custom products that require smaller production runs. Job costing aims to cost "the job" or project. This requires much more accounting and recordings in order to account for all costs associated with the job. The costs may not be typical or normal to the day-to-day operations of the business. Further, job costing will typically be used more when billing customers because it outlines what costs went into the job. Last, job costing typically includes product costing but product costing does not include job costing.

Product Costing

Product costing refers to all expenses that go into making a product such as: direct labor, direct materials, direct overhead, and indirect overhead. Product costing is typically used for a standardized product that is produced during day-to-day operations. Product costing is used for large-scale production and usually requires less record keeping due to the standardization.


Learn more about this topic:

The Role of Cost Accounting in Management

from NYSTCE Business and Marketing (063): Practice and Study Guide

Chapter 14 / Lesson 9

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