ACC 6140 California Miramar University Managerial Accounting Discussion & Responses
Compare and contrast each of these costing structures and provide examples from industry or companies as to how each costing system may be used.
What are similarities and differences that companies use these systems to monitor?
PROFESSOR'S GUIDANCE FOR THIS WEEK'S LE:
This week we studied two main costing methods: job-order costing and process costing. Companies can use either method depending on what they are manufacturing for sale. You might also have companies that utilize both where they manufacture both custom/unique items and standard products. For example, Nike makes sports/active wear for the average consumer as well as special-order/unique items for specific colleges/professional teams.
It is important to understand the differences of these cost systems as they are geared towards what the company is making. For example, Lays, Inc. uses mainly a process costing system in the making of potato chips. Batches are created for different flavors or types of chips manufactured. While each batch may be different flavors, the process overall is homogenous in contrast to job-order costing. Job-order costing is focused more on unique or one of a kind product. Swimming pool construction is a job-order costing process. Even though the basic process of digging a hole, lining it with rebar, plastering, and finishing is approximately the same, there are unique features to consider. Size, shape, color of plaster, color of decorative tile/stone create that uniqueness which must be tracked for each job.
1. Please make sure that you read the relevant chapter from the textbook
2. Watch the YouTube videos for this week and additional course material provide
3. Ensure that you can communicate your point of view clearly and without ambiguity. Provide one example to strengthen your point of view in the main discussion.
POST
by Thanyathorn Lapthitisate Compare and contrast Process costing is a costing structure that companies use to mass-produce the same goods. In this structure, the cost of the individual assets cannot be distinguished from one to another. This means that the price of one unit is the same as the cost of all the other units. In this costing structure, the costs are accumulated over a fixed time, analyzed, summarized, and then allocated consistently to all the produced units for the specified time. On the other hand, Job order costing is a costing structure used to determine the cost of manufacturing each unit. This method is used when the units are not similar, and the cost of manufacturing them is not identical either. Therefore, the technique is used in calculating the cost of each job. This method includes direct materials, direct labor, and the manufacturing overhead for a particular position.Similarities and differences The similarities between these two methods are that each unit's cost and the inventory involve labor, product cost of materials, and overhead (Rey-Mermet et al., 2018). However, there are differences in these methods; in job order costing, the product costs are evaluated individually since the units are not similar. There are then traced and recorded on each job cost sheet. On the other hand, the process costing is done as a whole and not at individual units because the units are not identical; the product costs are then traced to functions and departments. In the job order costing, finished goods are considered the products sold. All incomplete jobs are regarded as work in process inventory. On the other hand, process order thinks the number of units completed at the team costs as finished goods. The work in process is the units remaining to be completed and the cost per unit.Reference:Rey-Mermet, A., Gade, M., & Oberauer, K. (2018). Should we stop thinking about inhibition? Searching for individual and age differences in inhibition ability. Journal of Experimental Psychology: Learning, Memory, and Cognition, 44(4), 501.333 words
by Leiliane Guimaraes A job-order costing system records manufacturing activities using a perpetual inventory system. A perpetual inventory system continuously updates the accounting and production records for costs of materials, work in process, and finished goods inventories (Wild & Shaw, 2016).According to Eydman (2017), a job order costing would work better for a company where each product or service produces results from a particular customer order and sufficiently differs from each other. Construction and manufacturing industries are two examples of companies that use this model because it treats different jobs as separate things and, therefore, tracks each job's costs separately from the other jobs (Hoang, 2017).While job order is focused on identifying costs for labor and materials used within each production line process (Eydman, 2017), a process costing system is often used to trace, and determine production costs when similar products or services are provided (Wild & Shaw, 2016). It involves the accumulation of cost in a continuous production cycle where products are homogeneous and are indistinguishable from each other (Eydman, 2017). Examples of companies that use process costing include Chevron Corporation (petroleum products), the Wrigley Company (chewing gum), and Pittsburgh Paints (paint).Edyman, M. December 14, 2017. Comparison of job order and process costing. Journal of MBA at University of People, p. 2-3.Hoang, T. 2017. Job Costing 101 - What kind of companies use Job Costing? Irvine Bookkeeping. March 8, 2022. https://www.irvinebookkeeping.com/post/2017/12/14/what-kind-of-companies-use-job-costing.Wild, J. Shaw, Ken. 2016. Managerial Accounting concepts and principles. Managerial Accounting (5th ed.). Mc Graw Hill Education.256 words