Many companies, particularly those in the manufacturing industry mostly produce products following a forecasting on demand. Though from time to time it can make them on receiving orders from its clients. The items that are made and the work which is completed in accordance with the order of a customers is called job. Hence, the costing process intended to establish the cost of a job is extremely important. Job order costing therefore is the costing system which establishes the cost of the jobs obtained from a client (Walther, n.d.). In this way, job order costing approximations the costs of producing products in line with clients' instructions. Cost Concepts Cost is the sum of expenses whether estimated or actual attributable to a particular item (Bragg, 2012). Nevertheless, the word cost is difficult to define precisely. Its understanding rests on: • The kind of industry or business. • The setting it is used in. Classification of Cost Opportunity Cost Resources of a companies in operation in markets are sometimes limited while investment choices remain many. The business thus has to make a decision or pick just those investment options that offers the business the most returns on investment. As the business gives up the best next choice for investing the resources in, this return or income that the business might have earned over time is known as opportunity cost (Publishers & Ashar, 2011). Mary who attends college while she works on her part-time job earning a wage of $150 each week. During her spring break, Mary has decided to go to the beach and spend time with her friends. Mary’s boss has agreed to give her the time off but only without pay. The weekly wage of $150 that Mary will lose is an example of opportunity cost. Fix... ... middle of paper ... ...Is defined as a change in the Total cost once an extra unit of an item is manufactured. It can comprise of material costs, labor and a small percentage of fixed costs like selling expenses and administration expenses (Walther, n.d.). Conclusion Different jobs require various amounts of labor, expenses and raw materials subject to the superiority of the jobs to be carried out. The quality and size of items demanded can vary. Therefore, such a job might not need a standard manufacturing method. On no account are two jobs precisely similar. The finished product may not be the same. Clearly, the cost of every job will be different depending on the individuality of the work order obtained from clients. In regards to job order costing technique, every job is taken as single cost centre. Expenses to a job are allotted on either machine hours, processing hours labor cost.
In today’s operational management arena, there are certain expectations from a managerial aspect that must be met in order to be successful. A comprehensive look at the Space Age Furniture Company will show exactly what the Materials Requirement Planning (MRP) calculations are for this company at present time and then take the information given in order to properly suggest ways to improve the sub-assemblies. In addition, there will be an analysis on the trade-offs between the overtime and inventory costs. A calculation will be made on the new MRP that will improve the base MRP. This paper will also compare and contrast the types of production processing to include the job shop, batch, repetitive, or continuous, and determine which the primary mode of operation should be and exactly why. A detailed description on how management can keep track of the job status and location during production will also be addressed. Finally, there will be a recommendation on they type of changes that need to occur that will be beneficial to the company and at the same time add value to the customer. This paper will conclude with summary of the major points.
Job Order costing report: For different types of products different headlines are used in this method. This is for easily identifying difference transaction and need. It helps to giving importance on most demandable
material; work that is in progress, a finished goods inventory and the cost of goods sold.
For instance, if the company has set aside the target of producing 2,500 units with fixed cost amounting $30,000 and variable cost of $70,000. The total budgeted cost for producing the 2,500 units is $100,000 ($30,000 fixed costs + $70,000 variable cost). In this case, of Ferguson & Son manufacturing company will just look into the actual costs incurred for the production and will be compared with the budgeted costs. In this case, the quantity produced will be ignored for comparison, if in case the total cost incurred is $110,000 but produced 2,900 units, the company will mention that the ...
Process costing System is an accounting expression which describes one method to determine the manufacturing costs to the units manufactured . Processing is typically used when similar units are mass produced. Also process costing system is a type of accounting process costing which is used to determine the cost of a produced inventory. Chartered Institute of Management Accountants (CIMA) defines process costing as " The costing method applicable where goods or services result from a sequence of continuous or repetitive operations or processes. Costs are average over the units produced during the period, being initially charged to the operation or process "( College Accounting Coach, 2007). Process costing is more important and appropriate for all businesses producing identical products during which production is an ongoing flow. Toyota is on the of the major companies in the world that used well-known new philosophic management to produce identical products using process costing system.
As such, there is material cost regulator, manufacturing control, labor cost regulator, excellence control and so on. Conversely, control over the price is implemented through the methods of financial control and typical costing (Meigs, 1998). The control methods aid the management in understanding the operating competence of a firm. Cost accounting also determines the selling price. The intention of all business firms is minimizing costs and maximizing profits. The costs incurred in producing goods and services may be reduced through incorporating alternate but cheaper resources of
Since investments’ main aim is profit maximization, cost, output and returns are factors of value. To determine these factors and verify the profit, a market research on the investment has to be conducted. This is mainly to avoid losses. The main factor that has to be determined is the balance between the product’s supply and the demand at a certain price that is, market equilibrium (Aarhus school of business, 2004).
Total cost is all of the expenses incurred in the production of a product, to include fixed and variable costs. Fixed costs, are expenses that are constant and do not change from month to month regardless of the amount of products sold. For instance, the rent of the factory is considered a fixed cost, for the reason that, the rent must be paid whether products are produced and sold or not. Variable costs,
An organization costing system is a system that helps the management with the strategy planning while the system plays an important role in providing accurate cost information about the products and customers (Curtin, 2006). UPS utilizes the Activity-Based Costing (ABC) system. ABC assumes that activities cause costs and that cost objects create the demand for activities (Marx, 2009). The key to cost allocation under ABC is to identify the activities that are performed to provide a particular service and then aggregate the costs of the activities (Gapenski, 2012). This is a marked departure from the practice of sharing overheads costs equally or overheads becoming part of the overall profit-loss estimate instead of component product pricing (Nayab, 2011).
Cost can be divided into fixed and variable and by considering into fact that fixed and variable cost can be unarguably split into two, even though they behave differently based on the level of sales of volumes. Since, cost is used in every field to determine the price of an item and the unit sold. Two of the main components of cost are fixed and variable cost and is used to differentiate between the costs that have no direct correlation to business and those that do.
The job cost subsystem ensures that the costs of each job are gathered all in one place so the total cost of each job is identified. The identified total cost ($2783.70) will then allow markup and GST ($5877.26) to be added so the appropriate cost is invoiced to the customer for the job. The job cost subsystem also allows I Do Attire to identify which types of jobs are more profitable, so I Do Attire can focus to gain more profit in that job. It also identifies the accurate cost for each job, so the appropriate cost can be pr...
Primary production of homogenous goods and several processes are undertaken for the finished product to be realized is what is called process costing. All stages of processing and costs accrued during manufacturing of a product will be added to the final batch of products. Keenness is
...ns and material necessary that need to be consumed during the business processes. The biggest part of this activity is contract and orders related to natural gas supply, purchase and modernization of pipelines, and machinery required for maintain good condition of pipelines. Company needs to predict when and what amount of natural gas needs to be transferred to meet consumer demand. Another important task of procurement is purchase of compressors required for steady flow of natural gas to end customers and the maintenance equipment required to ensure high efficiency and dependable. It is required for the company to properly plan all supply orders to lower variable costs and increase profits. Each activity level requires supply of specific materials unique for the processes and operations, which shows that procurement is present in every single stage of value chain.
Cost accounting system has two types, job order costing, and process cost system. These two cost systems are very different, almost every company uses order costing or process costing. Starbucks, is a coffee shop where citizens congregate to drink there morning coffee, study, and or socialize. Starbucks is one of the oldest and largest privately held specialty coffee retailer in the United States. (Starbucks) Their passion is to discover the flavors you love and always bring it home, delivering the look, taste and aroma of the world’s best coffee and teas. Job order costing is a very easy way in order to help Starbucks managers to know how much profit their company (Starbucks) made.
Operations – To work out the right layout and work flow process in the company. The manpower resource allocation is also critical in the situation on the right balance of resource to handle the production. If possible, adopt a hybrid model to handle the flexibility in the product nature, make both the production line being able to configure standard and customized so to reduce setup and changeover time and cope with the demands.