1. 3-1 Copyright © 2012 McGraw-Hill Ryerson Limited Types of Product Costing Systems Process Costing Job-order Costing  A company produces many units of a single product.  One unit of product is indistinguishable from other units of product.  The identical nature of each unit of product enables assigning the same average cost per unit.  A company produces many units of a single product.  One unit of product is indistinguishable from other units of product.  The identical nature of each unit of product enables assigning the same average cost per unit. LO 1

2. 3-2 Copyright © 2012 McGraw-Hill Ryerson Limited Types of Product Costing Systems Process Costing Job-order Costing  A company produces many units of a single product.  One unit of product is indistinguishable from other units of product.  The identical nature of each unit of product enables assigning the same average cost per unit.  A company produces many units of a single product.  One unit of product is indistinguishable from other units of product.  The identical nature of each unit of product enables assigning the same average cost per unit. Example companies: 1. St. Mary’s Cement (cement mixing) 2. Petro-Canada (refining oil) 3. Coca-Cola (mixing and bottling beverages) Example companies: 1. St. Mary’s Cement (cement mixing) 2. Petro-Canada (refining oil) 3. Coca-Cola (mixing and bottling beverages) LO 1

3. 3-3 Copyright © 2012 McGraw-Hill Ryerson Limited Types of Product Costing Systems Process Costing Job-order Costing  Many different products are produced each period.  Products are manufactured to order.  The unique nature of each order requires tracing or allocating costs to each job, and maintaining cost records for each job.  Many different products are produced each period.  Products are manufactured to order.  The unique nature of each order requires tracing or allocating costs to each job, and maintaining cost records for each job. LO 1

4. 3-4 Copyright © 2012 McGraw-Hill Ryerson Limited Types of Product Costing Systems Process Costing Job-order Costing  Many different products are produced each period.  Products are manufactured to order.  The unique nature of each order requires tracing or allocating costs to each job, and maintaining cost records for each job.  Many different products are produced each period.  Products are manufactured to order.  The unique nature of each order requires tracing or allocating costs to each job, and maintaining cost records for each job. Example companies: 1. Bombardier (aircraft manufacturing) 2. Bechtel International (large scale construction) 3. Hallmark (greeting card design and printing) Example companies: 1. Bombardier (aircraft manufacturing) 2. Bechtel International (large scale construction) 3. Hallmark (greeting card design and printing) LO 1

5. 3-5 Copyright © 2012 McGraw-Hill Ryerson Limited Comparing Process and Job-Order Costing LO 1

6. 3-6 Copyright © 2012 McGraw-Hill Ryerson Limited Quick Check Which of the following companies would be likely to use job-order costing rather than process costing? a. Scott Paper Company for Kleenex. b. Architects. c. Heinz for ketchup. d. Caterer for a wedding reception. e. Builder of commercial fishing vessels. Which of the following companies would be likely to use job-order costing rather than process costing? a. Scott Paper Company for Kleenex. b. Architects. c. Heinz for ketchup. d. Caterer for a wedding reception. e. Builder of commercial fishing vessels. LO 1

7. 3-7 Copyright © 2012 McGraw-Hill Ryerson Limited Quick Check Which of the following companies would be likely to use job-order costing rather than process costing? a. Scott Paper Company for Kleenex. b. Architects. c. Heinz for ketchup. d. Caterer for a wedding reception. e. Builder of commercial fishing vessels. Which of the following companies would be likely to use job-order costing rather than process costing? a. Scott Paper Company for Kleenex. b. Architects. c. Heinz for ketchup. d. Caterer for a wedding reception. e. Builder of commercial fishing vessels. LO 1