This information is useful to estimate cash outflows. The project manager's attention is on when the costs are to occur, when the budgeted cost is earned, and when the actual cost materializes. This information is made up to measure project schedule and cost variances (Gray & Larson, 2005). The following are typical types of costs found in a project: Direct Costs These costs are on account with a specific work package. Direct costs are attributed to efforts made by the project manager, project team, and folks executing the work package.
Their similarities are first, both systems utilize the direct materials, direct labor, and overhead to track their cost. Secondly, both systems share the tracking method for their inventory of raw materials, their inventory of products in the process of manufacturing, and their inventory of products that are completed and ready for selling. Third, both systems costs and revenues are tracked by management by assigning a measuring unit (Saylor Academy, 2012). Their differences on the other hand are in tracking the cost. In job costing each item is tracked by assigning jobs and its jobs tracking sheet or database while in process costing each item is tracked by assigning a process or a department where the tracking data is obtained from the process tracking sheet or from the department production database (Saylor Academy, 2012).
Job and Process Costing Systems Costing as defined by Blocher, Stout, Juras, and Cokins (2016) ‘is the process of accumulating, classifying, and assigning direct materials, direct labor, and factory overhead costs to cost objects, which most commonly are products, services, or projects” (p. 96). Further relayed by Blocher et al. (2016), is the type of costing system a company employs depends on the industry, product or service manufactured or provided, and the benefit versus the cost of the particular system chosen. Job and process costing systems are two different avenues by which companies can accumulate their costs as a first step in determining accurate pricing for their product or service. While one method tracks costs that can be specifically attached to a unique product, batch of products, or service, and then also allocates the overhead to the individual units or services, the other method also tracks the direct costs but accumulates the overhead costs for the shared services used to produce indistinguishable products, then assigns them to a functional department, and from there assigns them to products.
According to Eldenburg and Wolcott, Cost Accounting has been used to make decisions, to measure, monitor and motivate performance, to analyze the profitability of customers, and to coordinate transactions with suppliers extending traditional cost accounting beyond the walls of the organization (8-9. All other references to Leslie G. Eldenburg and Susan K. Wolcott’s Cost Management Measuring Monitoring, and Motivating Performance will be indicated by page reference to this text.). There are various costing methods used to cost goods and services. The two primary costing methods used today. One is Traditional Based Costing (TBC), which involves Job Costing and Process Costing and the other is Activity Based Costing (ABC).
The first step is to identify the job that is the chosen cost object. A job cost record is used to record how many of each of the different materials is used in production, as well as how many labor hours are used to create the product. The second step is to identify the direct costs of the job. There are two types of direct costs that need to be calculated: direct materials and direct manufacturing labor. When employees order materials they are recorded on a materials-requisition record which has information about the cost of direct materials used on a specific job in a specific department.
Commonly, CVP Income Statement is for internal users. It is used by managers and stakeholders to analyze the performance of single products or product categories. Costs and expenses in CVP Income Statement are categorized as fixed expenses and variable expenses. It reports contribution margin as an aggregate sum and for each unit basis. It provides more details of the costs and resources needed to produce a certain product or the unit of a product.
1-Describe and explain the internal environment using the value chain analysis. Value chain defines the way of handling the business with a bunch of activities that converts inputs into outputs that customer requires. Customer value is obtained from three basic activities: activities that lower its cost, activities that differentiate that product and those which meets customers’ requirements. Value chain analysis defines how customer value is created by business by evaluating contributions of different activities within the business. Value chain analysis from a process point of view divides the business into different sets of activities starting from inputs that firm receives to the final products.
manufacturing time, outlet space, etc.) and causes costs. Cost objects are the reason for performing activities, and activities are the processes or procedures that cause work and create costs. ABC analyses costs from the perception of the how much a particular activity costs, and the amount of resources consumed by the end product of the activity. Using activity based costing differs from traditional cost accounting in that the focus is on the activities that are required to produce an end product, rather than assuming that the volume of the end product is the only driver of costs.
Costing could also be used to defend the procurement of new machinery or the extension of production facilities. The method of costing indicates the systems and processes involved in the estimation of costs and it depends on the type and nature of manufacturing activity (Chuter 1995). The two basic methods of costing are 1. Job costing - This is the cost estimation for a particular work order where the estimation of cost was carried out
TOPIC: A STUDY ON COST ANALYSIS: Cost analysis is economic evaluation techniques that involve the regular Collection, categorization, and examination of program or intervention costs, and cost of sickness. Cost analysis allows researchers to achieve cost minimization for the programs under concern .it a process by which business decisions are analyzed. The benefits of a given condition action are summed and then the costs associated with taking that action are subtracted. Some consultants also build the model to put a dollar value on insubstantial items, such as the benefits and costs connected with living in a certain town. Cost analysis is used to help people make decisions.