ACC 207 Job Costing vs - Grade: A PDF

Preview

Summary

Job costing analysis...

Description

ACC 207: Job Costing vs. Process Costing Kerri A. Gentz Southern New Hampshire University

Job Costing vs. Process Costing: Job cost is “the cost object of a distinct product or service called a job” (Horngren, 2018). Job costing involves the detailed accumulation of production costs attributable to specific units or groups of units. Process cost is “the cost object is masses of identical or similar units of a product or service” (Horngren, 2018). Process costing involves the accumulation of costs for lengthy production runs involving products that are indistinguishable from each other. The differences of the two methodologies are as follows: The uniqueness of a product is related to job costing, and process costing is used for standardized products. Size of job. Job costing is used for very small production runs, and process costing is used for large production runs. Record keeping. Much more record keeping is required for job costing, since time and materials must be charged to specific jobs. Process costing aggregates costs, and so requires less record keeping. Customer billing. Job costing is more likely to be used for billings to customers, since it details the exact costs consumed by projects commissioned by customers. A company the utilizes the process costing method is Coca-Cola. Coca-Cola produces mass quantities of identical products in batches employing a consistent process. In the first stage of production, Coca-Cola mixes direct materials—water, refined sugar, and secret ingredients— to make the liquid for its beverages. The second stage includes filling cleaned and sanitized bottles before placing a cap on each bottle. In the third stage, filled bottles are inspected, labeled, and packaged. Work in process begins with the first stage of production (mixing and blending), continues with the second stage (bottling), and ends with the third stage (inspecting, labeling, and packaging). When products have gone through all three stages of production, they are shipped to a warehouse, and the costs are entered into finished goods inventory. Once products

are delivered to retail stores, product costs are transferred from finished goods inventory to cost of goods sold. (Coca-Cola). A service company is a business that provides a service, for example a landscaping company provides the service of property maintenance. A merchandising company buys products in bulk to build an inventory to sell to customers and businesses. Although landscapers buy products and equipment, they use the products and equipment to provide the service, not necessarily to make a sale. Both companies have assets and liabilities and use the accounting cycle. Cost accounting is a more efficient and cost effective way for service industries to operate that will help reduce overall costs of conducting business. It enables a company to efficiently use its resources and make it more profitable. For a landscaping company, job costing is a vital component to the profitability of the company, understanding your costs will determine the profitability. There are five main cost categories to track while determining job costs. The five main categories are as follows: materials, labor, equipment, overhead and subcontractors. Material costs associated with a job would include pavers, mulch, gravel, fuel for equipment or whatever else is required to get the job done, it needs to be tracked. Labor would include the man/woman hours to provide the service of the property maintenance.Equipment on a job include purchase costs, repair, maintenance, and operating costs on-site. Overhead the costs of doing business, includes costs such as paying your administrative assistant, paying the lease on your facility, or insurance fees. If you hired subcontractors for the job, the direct cost of their services used for the job must also be tracked and included in the overall cost of the job. Analyzing operations on a day-to-day basis, job costing also gives your crews measurable goals that they must meet in order to achieve profitability. With job costing, you’ll be able to analyze how close your estimated costs are to your actual costs and make changes where they’re needed.

Refrences: Coca-Cola Company, (March 13, 2019).“Home Page,” Retrieved from http://www2.cocacola.com/ourcompany/bottlingtoday....