...When are companies likely to use a job costing system or process costing system? Describe the specific characteristics of each system and provide several examples (i.e. at least two) from companies in your community for each system (i.e. at least four companies should be described). Companies use both job costing system and process costing systems. It is important to understand the differences in the two systems. According to Blocher (2013), a job costing system is a product costing system in which it collects and assigns certain costs to a specific job. A process costing system differs in that it collects product or service costs by process or department and then assigns them to a large number of similar or nearly identical products. According to Goss (2003), the easiest way for costing is to average all the indirect costs and allocate them. This would be an example of a process costing system. Some local companies are Dixie Brick and Coca-Cola. Dixie Brick is a company that develops brick blocks for local construction companies. Since the company produces a mass amount of bricks it is best to use the process costing system. It would not be beneficial to assign a different price to differing bricks. Coca-Cola is also a company that produces nearly similar products and sells the products for the same price. Different ingredients are used in the different flavors of products. The products are still similar enough that it would not make sense to assign different prices for...
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...Job and Process Costing Managerial accounting is made up of different forms of accounting. This week was focused on cost accounting and the two different forms of cost accounting, job and process costing. According to Albert Galway, cost accounting, in general, involves determining the costs for different areas of a firm (1991). Depending on the firm, one may find a job costing system more important as where another firm may be able to utilize a process costing system to allocated costs. Stephen did a very good job of describing both job costing and process costing. Using the textbook by Blocher, Stout & Cokins, a definition was given for each costing system. The examples given provide insight on when and how job costing and process costing is used within different industries. There are also instances when both job costing and process costing can be used. This hybrid system is called operations costing according to Blocher, Stout & Cokins (2010). Some different industries that utilize the operations costing system are clothing, shoes, or even the furniture industry. These examples are all a type of manufacturing. According to Avi Rushinek, many manufacturing companies utilize operations costing because they ignore work-in-progress. Could operations costing be the better method of allocating cost in the manufacturing industry as opposed to job costing or process costing alone? References Blocher, E., Stout, D., & Cokins, G. (2010). Cost Management: A Strategic Emphasis...
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...which a job order cost system or a process cost system could be used. How might each of the cost systems be implemented within this particular industry? Does an industry exist in which the job order and the processing cost systems would not be suitable? Explain your rationale." Business - Accounting Alternative Costing Methods The text presents job and processing costing systems as virtual “polar extremes,” there are many situations where it may be best for a company to use a hybrid system that combines attributes of both systems. Describe such a situation and discuss how the hybrid system may be better than either pure job or pure process systems. Think Twice Assume you own a business that makes two complementary products for which you allocated manufacturing overhead proportionally. A competitor is trying to undercut your price for one of the products. How might ABC costing help you better compete with this pending threat? Activity Base Costing- How do managers cost products or services using ABC systems? When should managers consider using an ABC costing system? How should they decide to adopt this method? Alternative Costing Methods I would like you all to select a costing method: process, job, or activity based. Describe the nature of your chosen method. What types of organizations should choose that method? How is this method different from the costing methods you did not choose? I have implemented a job costing system...
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...Bennett system has a higher cost of paperwork because we are using the Job Order Costing and the Conley System uses process costing. Conley Corporation uses Process costing in accumulating cost of production. We are costing products based on per job order bases. Conley is costing their production on a per department basis because it has standard model design. Our products are based on costumer's specification, and therefore each product is unique. Process costing can not be used under our present set-up. Possible reasons for cost differences between actual and standard costs under Conley's system: a. Materials Price and Usage Differences b. Labor Rate Differences c. Labor Efficiency Difference d. Production Volume Difference Standard costs are usually developed from previous year's experiences and some adjustments from each department's managers. If our product's sales volume is seasonal in nature, it would be better to have our overhead allocation rate change to monthly from annually. If not, we could stick to annual overhead rate for simplicity of computation. Under our present production, it is preferable to stick with Job Order costing, unless we change our products to a more standard design (no customer specifications), and Process costing will not work under our system. 2. Since Bennett main operation concentrates on manufacturing customized trucks, they could still maintain using its job costing. This is because each model that they produce may not be applicable for...
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...Ashley American InterContinental University Unit 3 Discussion Board Managerial Accounting ACCT310-1205B-06 January 27, 2013 Job order costing is used in situations where there are different products that are being produced each period. According to accounting for to management (2000), the costs are traced to the jobs and then the cost of the jobs that are divided by the number of the units in the job that are arrive at the cost per unit (para. 1). The type of industry that uses this type of system are places like the Hospitals, laws firms, movie studios, advertising and accounting firms. All of these industries deal with procedure and providing a type of service. The companies have to focus on more than one good and it can become a complex job when it comes to job order costing system. But it is also a way to the business organized and knows what area is helping them out in the long run. Manufacturing costs can be in three broad categories which are direct materials, direct labor and manufacturing overhead. Process costing methods are used for mass productions. It is a way to analyze the net cost of a manufacturing. Figuring out how much it would cost to fill the goods and how material is needed to keep them stocked. Soda, cereal, toilet paper, gasoline are some items where the process costing system occur. This system is mainly where homogenous items are being manufactured. According to Vitez (2003), It saves time and management money. But its how management accountants...
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...Activity- Based Costing & Process Costing Job Order Costing: 1. Many different jobs are worked on during each period, with each job having different production requirements. 2. Costs are accumulated by individual job. 3. Job cost sheet is the key document controlling the accumulation of costs by a job. 4. Unit costs are computed by job on the job cost sheet (Similarities between Job Order and Process Costing System, nd). Process Costing: 1. A single product is produced either on continuous basis or for long periods. All units of product are identical. 2. Costs are accumulated by departments. 3. The department production report is the key document showing the accumulation and disposition of costs. 4. Unit costs are computed by department on the department production report (Similarities between Job Order and Process Costing System, nd). The job order cost system is most suitable when the products differ in types of material and work performed. Thus, each product is made according to the customer's specifications and the price quoted is closely tied to estimated cost. Examples of types of companies which might use job order costing are printing companies and shipbuilding firms (Fletcher, nd). The process cost system is commonly used where products are manufactured under mass production methods or by continuous processing. Industries using process costs are paper, steel, chemicals, and textiles. Assembly-type processes such as washing machines and electrical appliances...
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...Bakery, Inc. This paper will layout the strategies that the management of Super Baker, Inc. used, as well as discuss why management thought it was a good idea to an activity-based costing system into their business. The comparison of a job order cost system and a process order system will be analyzed to decide which would be the best fit for Super Bakery, Inc. Super Bakery, Inc. was founded by ex-National Football League Pittsburgh Steeler play Franco Harris his vision was to provide vitamin, mineral, and protein enriched doughnuts to schools and other institutions. Super Bakery is a virtual corporation, in which only the core, strategic functions of the business are performed inside the company (Darling, October 1996).The main thought about running a company this way was to pull other organizations with expertise in these areas together to reduce the amount of liabilities for facilities, labor, and working capital. The company can claim that this system of outsourcing is working because sales have grown at an average annual rate of approximately 20%. Even though Super Bakery was experiencing some success with the outsourcing at the same time it was proving to be a challenge to the organization in terms related to controlling the costs. The organization started off with a more traditional costing method that simply spread the costs of the operation to every customer. This caused every customer orders to appear to cost the same amount to complete but this was not the case...
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...incur a deduction of 5% for the first day, and 1% for each subsequent day including the actual day on which the work is received. Weekends and public holidays are included. FORMATTING i. Font: Times New Roman ii. Font Size: 12 iii. Single Line Spacing iv. Header - Mention Your Name and Student ID in the header of EVERY PAGE. v. No colorful text or images. vi. Add Page Numbers RESULTS i. Results will not be released individually over the phone or email. Result will be visible to all students via LMS on a date that will be announced soon. GOOD LUCK! Q1. Draw Job-Order Costing Document Flow Summary. (5) Job Cost Sheet Material Requisition Manufacturing overhead Cost Q2. What are the differences Between Job-Order and Process Costing?(5) Job costing involves the detailed accumulation of production costs attributable to specific units or...
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...Costing Methods Paper Erica Rice ACC/561 18 February 2013 Edward Hastings Costing Methods Paper What strategies did the management of Super Bakery, Inc. use? Super Bakery’s challenges are to control cost by reducing the overhead for serving their customers in different parts of the country, and by doing this they can use the ABC method; Activity-Based Costing System to enhance control over overhead costs and under ABC, the company can trace many overhead costs directly to activities by allowing some indirect costs to be identified as direct costs like the customer’s order cost for every individual customer that seems to be the same amount. The managers can become more aware of their responsibility to control the activities that generate those costs. The second reason that Super Bakery’s went with ABC was because of trying to control cost in the business part of the company like, manufacturing, sales, warehousing, and shipping. By taking control of the product cost this should contribute to settling selling prices that can help them achieve desired product success. With a more precise cost data the managers could decide on whether to buy or make a product part or piece, and whether to remove a product. ABC helps the managers to minimize the amount of overhead that is payable to their product. If the overhead is payable based upon the amount of direct labor used, then the managers can minimize the amount of overhead payable to their product by minimizing the amount of...
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...a new 1.5 gigabyte computer memory chip on behalf of EEC while using a job order costing system, which is a costing system where costs are to be collected then assigned to different units of production for each unique job, or process costing system, which is a costing system that is known to accumulate production costs by using a department or process’s data over a specific period of time in order to report the costs of a new product. I am going to focus and highlight the many differences within the various systems in use to do this job. I will also attempt to describe how these selected systems will work for EEC in order to track the costs of these products. Furthermore, my job in this assignment will be to identify the actual cost driver in order to explain the pattern and process of cost tracking. I will then go on to provide examples of products that the EEC’s firm could offer in order for a job-order costing system to be appropriately applied. •Should EEC use a job-order costing system, which is a costing system where costs are collected and assigned to units of production for each individual job, or a process costing system, which is a costing system that accumulates production costs by process or department for a given period of time, to report the costs of this new product? ◦How are the systems different? I believe that EEC should most definitely use a job-order costing system. “Job order costing systems are simply the various components of a much broader form of accounting...
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...Costing Methods ACC/561 May 14, 2012 Costing Methods According to Kimmel, Weygandt, and Kieso (2009), “a traditional costing system allocates overhead on the basis of a single predetermined overhead rate.” Although this may be the best costing method for some businesses, not all businesses are the same. Created in 1990, Super Bakery, Inc. started by using the traditional costing methods to determine costs; however, quickly came to realize that the methods were not taking individual markets into consideration. The purpose of this paper is to elaborate upon Super Bakery, Inc.’s transition from a traditional costing method to an activity-based costing method. In doing so, an attempt will be made to highlight the strategies of Super Bakery Inc.’s management team. Furthermore, this paper will share why the management of Super Bakery Inc. deemed it necessary to install the ABC system. Finally, the paper will divulge why a job order cost system or a process order cost system would or would not work for Super Bakery Inc. Strategies Super Bakery Inc. is a virtual company that outsources most of the manufacturing activities. By outsourcing most of the manufacturing activities, Super Bakery Inc. can save on cost associated with owning machinery. Not only does Super Bakery Inc. save on the cost of the machinery but also on the costly expense of maintenance and repairs. Furthermore, the company could reduce overhead expenses such as salaries and even utilities. By using this strategy...
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...ch05.qxd 9/27/04 4:19 PM Page 174 CHAPTER Q1 Q2 Q3 Q4 Q5 Q6 Job Costing In Brief Custom products and services, which are produced singly or in small batches, need to be valued for financial statements, tax reporting, and management monitoring. Job costing is an accounting method used to assign product costs to custom products or services. In job costing, direct costs are traced and overhead costs are allocated to individual jobs. Sometimes defects occur in custom products. Defective units can sometimes be reworked. The costs for both spoilage and rework need to be accounted for, as does the cost of scrap that arises from production. This Chapter Addresses the Following Questions: How are costs assigned to customized goods and services? How is overhead allocated to individual jobs? What is the difference between actual costing and normal costing? What are the uses and limitations of job cost information? How are spoilage, rework, and scrap handled in job costing? What are the quality and behavioral implications of spoilage? ch05.qxd 9/27/04 4:19 PM Page 175 BOMBARDIER: CUSTOM MANUFACTURING n 1942, the Canadian company L’AutoNeige Bombardier Limitée began manufacturing tracked vehicles for snow-covered terrain. These vehicles were early models of what later became snowmobiles. In English, L’Auto-Neige means snow car. Over time, the company developed expertise in building engines and expanded into other markets such as personal watercraft, aircraft, subway cars, buses...
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...Job Costing Summary The cost accounting system is used to accurately record, measure and report product manufacturing costs. It is critical to for such system to provide up-to-date information for the product cost. There are two types of cost accounting system, the job order cost system and the process cost system. The former system (job order cost) is suitable for production that will varies in characteristics from job to job. Each production might have different raw materials or a different labor time as well as overhead rate, so it is important to record all these differences and correctly assign costs to specific products. The latter, the process cost system, is a system that is best used for production of a large volume of similar products. With job order cost system, the flow of costs such as raw materials, direct labor, and overhead cost will reflect the actual physical flow of materials into finished goods as detailed below: Accumulation of direct material, labor and overhead cost – a manufacturer will debit these account to record all the costs. Assignment of cost to jobs – as the materials and labor has been requested; the company will assign these costs to a specific job (into the work in process account) or into an overhead costs if it is not directly related to a specific job. Then, the company will record the predetermined overhead rate into work in process account (a company might use either direct labor hour, direct labor cost, or machine hour as an activity...
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...CHAPTER 4 JOB COSTING TRUE/FALSE 1. Direct costs are allocated to the cost object using a cost-allocation method. Answer: False Difficulty: 1 Objective: 1 Terms to Learn: cost-allocation base Indirect costs are allocated to the cost object using a cost-allocation method. 2. Quality control costs may be a direct cost of the Manufacturing Department, but an indirect cost of an individual job. Answer: True Difficulty: 2 Objective: 1 Terms to Learn: job 3. Cost objects may be jobs, products, or customers. Answer: True Difficulty: 1 Objective: 1 Terms to Learn: job 4. The cost driver of an indirect cost is often used as the cost-allocation base. Answer: True Difficulty: 1 Objective: 1 Terms to Learn: cost-allocation base 5. A company may use job costing to assign costs to different product lines and then use process costing to calculate unit costs within each product line. Answer: True Difficulty: 2 Objective: 2 Terms to Learn: job-costing system, process-costing system 6. Job costing is commonly used to estimate costs in beverage production. Answer: False Difficulty: 1 Objective: 2 Terms to Learn: job-costing system, process-costing system Process costing is commonly used to estimate costs in beverage production. 7. In a job-costing system the cost object is an individual unit, batch, or lot of a distinct product or service. Answer: True Difficulty: 1 Objective:...
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...Job-Order Costing Jenis Sistem Akuntansi Biaya Job-order biaya adalah salah satu dari banyak sistem penetapan biaya akuntansi yang berbeda.Mencari sistem yang tepat untuk sebuah bisnis adalah kunci untuk pemantauan dan pengendalian biaya.Ada berbagai jenis sistem penetapan biaya manajemen dan biaya yang akuntan mungkin datang.Masing-masing sistem penetapan biaya ini dapat menangani entri tertentu dengan cara yang berbeda. Satu jenis sistem penetapan biaya yang populer di industri tertentu disebut penetapan biaya job-order. Penetapan biaya job-order dapat digunakan dalam beberapa keadaan di mana jenis biaya lainnya seperti penetapan biaya proses atau biaya normal tidak akan efektif. What Is Job-Order Costing? Penetapan biaya job-order adalah sistem biaya yang digunakan untuk mengumpulkan biayadengan pekerjaan. Pekerjaan ini juga bisa disebut batch, karena setiap pekerjaan umumnyamerupakan "batch" dari produk serupa. Setiap bets harus individual dalam beberapa cara untuk membuatnya berbeda dari batch lain untuk itu menjadi pekerjaan yang terpisah. Jika batch semuaidentik, jenis lain dari penetapan biaya akan lebih tepat. The Job-Order Costing Process . Ketika suatu perusahaan beroperasi dengan menggunakan penetapan biaya job-order, sebuahrangkaian peristiwa tertentu biasanya akan terjadi dengan setiap pekerjaan. Secara umum, prosesadalah sebagai berikut: • Perintah (atau sales order) yang diterima untuk batch produk • Sebuah pesanan produksi dikeluarkan dari pesanan penjualan ...
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