Included in this report is the brief overview of three separate companies who may utilize job-order costing systems. The three companies looked at are Nortech Systems, Dynamic Material Corporation and Globecomm. You will see that each of these companies has unique offerings and provides multiple products to multiple industries.
The first company that apparently uses job-order costing systems is Nortech Systems, Inc. Their website is http://www.nortechsys.com and a brief summary of their services is as follows: Nortech Systems, Inc., is a full-service electronics manufacturing services (EMS) provider of wire and cable assemblies, printed circuit board assemblies and diagnostic repair and integration services including, higher-level assemblies and box builds for a wide range of industries. Markets served include medical, automotive, aerospace, computer peripheral, commercial, telecom, government and consumer. Nortech Systems has a range of specialized, high-tech facilities used for customized design, manufacture, testing and repair of its solutions. (Nortech, 2009).
It is evident that the form of costing system that would be used in this company would be job-order costing. This company can manufacture and produce products for industrial, medical, aerospace and other industries. Their broad span of products and clientele require Nortech to not only manufacture many different products, but also manufacture them on different scales. The need for independent job-costing record keeping is obvious do to the nature of this business.
Nortech summarizes what they do as follows:
Our services run the gamut from design, prototyping, manufacturing and testing to diagnostics and repair. They span the length of the supply chain and include a diverse range of solutions — from bulk cable to surface-mount PCBs, from box-builds to unique, custom-designed widgets. A Nortech advantage is our breadth of expertise and capabilities which include:
• Wire and Cable / Harness Assembly
• Printed Circuit Board Assembly (PCBA) and Diagnostic Repair, and
• Higher-level Assembly / Integration. (2009). The vast range of products and services this company offers requires tight record keeping due to the complexity and job cost assignment. The direct costs of material for each type of product differs dramatically and must be accounted for on each order processed. As with the material, the direct labor varies from product line to the service support provided with each product.
The second company that could utilize job-order costing systems is Dynamic Materials Corporation. Their website is http://www.dynamicmaterials.com and a brief summary of their services is as follows:
Dynamic Materials Corporation is the world’s leading provider of explosion-welded clad metal plates. Its products, which are typically used in industrial capital projects, include explosion-welded clad metal plates and other metal fabrications for use in a variety of industries, including oil and gas, petrochemicals, alternative energy, hydrometallurgy, aluminum production, shipbuilding, power generation, industrial refrigeration and similar industries.
(Dynamic, 2009).
Dynamic Material Corporation must use job-order costing due to the flexibility a customer has in placing an order. In Dynamic’s Form 10-K 2006, page 15 found on their website it states: Customers have the right to change orders after they have been placed. If orders are changed, the extra expenses associated with the change will be passed on to the customer. However, because a change in an order may delay completion of the project, recognition of income for the project may also be delayed. (2009).
When a customer changes their order, a production order change form is probably utilized. This would include the agreement between the customer and the company regarding the price change and time change needed in order to fulfill the order. In order to measure the direct material cost in a change to an order like this, a material requisition form would be filled out and this document would specify the type and quantity of materials to be used. This form would contain a requisition number and a specific job number assigned to this job as a way to account directly for the material used on this job. A third example of a company that would utilize job-order costing is Globecomm. Globecomm website location is http://www.globecommsystems.com and a brief summary of their services is as follows: Globecomm integrates satellite into your network applications in order to provide reliable, high-quality connection to the edge of the network, broadcast one-to-many, and support bandwidth-hungry applications. We are the only company in the industry that can, under one roof, design, install, integrate, support, manage and operate your systems and networks. Or we can provide turnkey services that offer the same features and functions as a customer-owned facility. (Globecomm, 2009).
Globecomm, like the other two companies previously discussed, has many services, products and offerings that can be designed specifically for the customer. They cater to the government & military, cellular, media and entertainment, maritime and other markets. The customization that Globecomm utilizes for each customer requires a job-order costing system in order to properly apply the direct costs of both material and labor for each customer. As you can see, each of the three companies listed in this report have a real need for job-order costing systems. Each company offers distinct and multiple manufacturing availabilities and offerings to many different customers with multiple and unique needs. Their accounting requirements are vast, difficult and complex. To properly account for the costs associated with each product, the job-order costing system is recommended for proper margins and pricing to ensure success among the many product lines. References
Dynamic Materials (2009). Retrieved May 1, 2009, from http://www.dynamicmaterials.com
Globecomm Systems (2009). Retrieved May 1, 2009, from http://www.globecommsystems.com
Nortech Systems (2009). Retrieved May 1, 2009, from http://www.nortechsys.com
