 In this discussion, we will discuss the discussion question of when would a company use a job cost system or a process cost system? Support accounting instruction by clicking the link below giving you a free month membership to all of the content on our website broken out by category further broken out by course. Each course then organized in a logical, reasonable fashion making it much more easy to find what you need then can be done on a YouTube page. We also include added resources such as Excel practice problems, PDF files and more like QuickBooks backup files when applicable. So once again click the link below for a free month membership to our website and all the content on it. This is going to be a very common type of discussion question, a very common type of essay question. First thing we might want to note is that the job cost system and process cost system are both commonly used within the manufacturing process. This might be obvious in that the types of area that we are learning, however, if we're not focusing in on just a job cost or process cost system, it won't be obvious and that's the first thing we want to point out. As we zoom in on specific topics, note that you want to point out kind of the obvious framework of that topic because when you're thinking about things outside of that specific framework then it's something important to note and it could pick up some points in an essay question or a discussion question and that would be that these are two types of systems typically used often used in the manufacturing type of business. So we're talking about a manufacturing type of business as opposed to a business like a service business that doesn't have inventory or one that's just a merchandiser that purchases and sells inventory. So usually, usually these two items would be in a manufacturing type of business. Again, a job cost system could be used in some other type of businesses as well. It won't be as complex, but it could be used in a service type business as well. So that's the first thing we want to basically consider and then think about, well, when would we use the job cost system? When would we use the process cost system? And typically there's different characteristics that we can list as to when someone would use a process cost versus a job cost. They all are related in a lot of ways. So if you start thinking about them, you can say, hmm, well, that would make sense because if this is one of the characteristics, then you would think the other would be one of the characteristics. For example, if you're using a job cost system, you're usually making things that are different in nature. So they're not going to be all the same things. You can think of things like custom things. That's why construction oftentimes has a job cost system because the jobs will be different if we're making any custom product, custom jewelry, custom surfboards, custom woodworking or things like that. Well, everything we make is custom. We're making it custom to a specific item and therefore we can track the cost of that job specifically to that particular item. So that's going to be one of the main things that you can kind of think of. That's the one that I typically think of whereas a process cost system, everything is the same. So every unit that we make, you can think of like making nuts and bolts or making oil and making taffy, making some type of candy. It's all the same. Every unit we make will be the same. That's going to be the principal difference. And you can think of other characteristics that will basically lead from that. If our goal is to make things different in nature, then it's going to be more expensive to do that because the whole point is to have something that's a bit unique that's customized and that costs more. So typically in a job cost system, we'll have inventory items that will be costing more. In a process cost system, the goal is to have them really all exactly the same and then put in a process that makes it as cheap as possible to make the exact same thing. So we want to maximize the production of the same thing and that of course makes the process cost system, the units we make, the things we're producing cheaper. They're going to be cheaper because they're all going to be the same typically and therefore we can put in a process to make those one things really well, really fast, really in an efficient type way. In a job cost system, we also are going to have items that are typically less inventory. So we usually have less inventory, possibly a bigger inventory or more value. So that would make sense as well. We have less inventory that we're going to track typically because we're working on custom items that take more time in order to do that. And therefore we have less inventory that we're going to track and that would kind of follow from the fact that we are making items that are going to be different in nature. Whereas in a process cost system, we may have a whole lot of inventory. So we may have a lot of different items that we need to track and that of course process from the mass production type of items that we're trying to produce typically in a process cost system because we're trying to make them all the same in nature. So you can think about the differences in the types of processes then. That's going to be when you would basically use one versus the other. And then you can go into a little bit more on the essay question in terms of why or what are the differences in processes between the two. And of course the job cost system is going to track each individual item, each piece of inventory with a separate job. It's going to have a separate job for the inventory tracking the more unique type of job as they go through the process. But the process cost system can't track each piece of inventory each job typically because they're all the same and they want to mass produce things. But they do need to track the process of it going through the working process to the finished goods from raw materials to work in process to finished goods. And they do that by the process. So it's got to go through this process and then that process and we'll track the information not by specific types of inventory or units of inventory but instead by the process as it goes through.