Free Report Example on Costing Systems

Introduction

Costing systems are essential in any business as they determine how operations are carried out. Costing systems monitor the costs that the business entity incur. Management uses various information in making decisions about considerable expenses that must be reduced. Therefore varied control systems tend to be suitable for different circumstances, which are the case for job costing and process costing system

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A job costing system is an expense monitoring in which businesses create products to fill client orders. It is used when companies produce unique products or jobs. A job costing system is used when the management wishes to use service to assess economic effects accrued during adding a product or making a decision on profit performance (Skinner, 2018). On the other hand, a process costing system is used when companies produce identical product units in batches by employing a consistent manner. It is used in mass production companies as output consists of a like team that undergoes a similar operation.

Characteristics of Job Costing System

Job costing is used in case of customer requests as per specific requirements., Job prices are always agreed with the customer based on overall costs (Anderson, 2018). A particular record is kept for each job done for profit calculations, and all expenses are transferred and recorded to the job account.

Characteristics of Process Costing

The production of products under process costing tends to be continuous except for a plant shutdown for repairs. It is a process where the finished product must result from two or more methods. The production costs in one process tend to be transferred to a subsequent process like the output (Freedman, 2018). Also, average loss and wastage tend to be expected due to abnormal conditions during the production process. The cost of production is always pre-determined upon which a definite sequence of displays must be followed.

Examples of companies that employ process costing systems include Chevron Corporation and Coca-Cola since they require several methods before a final product is produced. Examples of companies that use job costing include airplanes like Boeing and Accounting companies like Deloitte and Price water Coppers.

Conclusion

Costing systems tend to enhance the profitability of any business due to various controls and designs that aggregate overall costs and revenues. Job costing is more likely used when producing particular products in smaller portions, while process costing is used when making standardized products in large quantities.

References

Anderson, S. (2018). Managing Costs and Cost Structure throughout the Value Chain: Research on Strategic Cost Management. SSRN Electronic Journal.
https://doi.org/10.2139/ssrn.869070

Freedman, M. (2018). Strategic cost management. Strategic Change, 2(5), 261-265. doi: 10.1002/jsc.4240020504

Popesko, B., & Novák, P. (2019). Implementation of the Process-Oriented Costing System in a Hospital Department. International Journal of Trade, Economics, And Finance, 82-87. doi: 10.7763/ijtef.2014.v5

Skinner, R. (2018). Cost And Management Accounting Practices. Australian Accounting Review, 3(6), 31-33. doi: 10.1111/j.1835-2561. 1993.tb00369.