Discussion Board Forum 2
Mitzi N. Harvey
Characteristics of Companies that use the Job Costing or Process Costing System Cost Accumulation Methods
With the massive amount of businesses operating in our global economy, it only makes sense that various costing methods would be necessary to effectively suit the diverse business needs. Cost management accountants accumulate a companies’ cost information based on the type of costing system implemented by the company. For all companies, the choice between a job costing and a process costing system is a crucial decision in maintaining a firm’s cost structure and effective management. According to Hicks (2012), companies that deal with unique product; those that are not produced at a mass level, should implement a job costing system. Job costing method. The job costing system accumulates an item’s costs and then assigns these costs to specific jobs, customer, projects, or contracts (Blocher, Stout & Cokins, 2010, pp 92-93). In other words, this method gathers cost information for the direct and indirect materials and labor costs associated with a particular job performed. Some of the businesses that record cost information based on individual jobs are white collar firms, including law and accounting firms and construction on contractors, including general construction on electrical contracting businesses. For these types of companies, job activities can be unique and solely based on the specific needs of a particular customer. Therefore it is extremely important that business activity costs are properly accumulated and linked to the appropriate job, customer and/or project, so that management can determine if the business activities have been profitable. For example, let’s consider two local firms; Bowden & Wood, PLLC (CPA, business advising, and consulting firm) and Dunn Electric, LLC (small electrical contracting firm) and their job costing methods. According to...
References: Blocher, E.J., Stout, D., & Cokins, G. (2010). Cost management: A strategic emphasis (custom) (5th ed.). Boston, MA: McGraw-Hill. ISBN: 978-0-390-94421-4.
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