Free «DB Forum Reply» Essay Sample
The facts stated about job costing and process costing in thread 1 is true. This is because process costing produces a single product in a continuous basis and all the products produced from this system are identical ( Blocher et al, 2010). This makes companies that produce chemical products, food products or plastic products to consider this system since they produce a single product. In addition to this, under process costing, departments accumulate costs rather than a particular order to ensure uniformity of the unit cost assigned to each product (Reeve, 1991). Management accountants rely on process costing information while making pricing decisions and product mix decisions. Currently, most managers rely on process costing information in carrying out C.V.P. analysis to identify departments that perform poorly and make decisions whether to drop these departments (Reeve, 1991). Moreover, managers use information from process costing to carry out analysis on the optimum product mix that they will adopt to ensure that the company achieves maximum profitability.
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The facts stated about job costing are also true. In job costing, material labor and overhead costs are assigned to a particular order from a customer. This is because in each production run, the production department works on many different jobs and each job may require special processes (Blocher et al, 2010). Job cost sheet is an important document that helps in controlling the accumulation of costs in each job (Williams, 1985). This form of costing is also common in companies involved in construction works and companies manufacturing goods that are released in discrete batches. It is also true that accounting in job costing is more accurate than process costing since separate cost account is kept for each job and this makes it easy to identify costs at a particular time. Most companies using job-costing system opt to use activity based costing to allocate their costs since it helps managers to identify costs with their specific cost drivers (Williams, 1985).
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