Q – Hi, please read the discussion below and prepare a Reply to this discussion post with
comments that further and advance the discussion topic.
Please provide the references you used.
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Word limit: 50 to 70 words please do not exceed the limit.
Discussion
Job Order Costing System
A job order cost system is one where a company tracks the expenses for every distinct “batch” of
work separately. In other words, the business views each task as a separate entity and, as a result,
tracks its costs independently of the costs of the others (Tayler et al., 2023). As a result, a company
that employs this kind of system ought to have a variety of positions. In essence, the type of
business that should use this system does various tasks. This paper explores how a job order costing
system can be used in a graphic design agency, its benefits to the organization, and the specific
accounts used in this system.
Use of Job Order Costing in a Graphic Design Agency
One of the ways that this type of business can use job costing is by tracking the costs incurred.
Using job cost, a graphic design firm can independently track expenditures for each project. This
is crucial because various projects may need resources like designer time, software licenses, and
stock photos. The agency may precisely assess the profitability of each project by allocating these
costs to certain workers.
This method helps make sure that prices are accurate. Setting fair charges for services is made
easier with the aid of job order costing. The agency can decide on a competitive yet successful
pricing approach by knowing the exact costs of a given job. Through its use, underpricing—which
could result in losses—and overpricing—which might result in missed business opportunities—
are avoided (MSG, n.d). Furthermore, the job costing method helps such businesses allocate
resources efficiently. For instance, if they observe that particular project types continuously use
up more resources, they can decide with knowledge whether to hire more people or spend money
on specific software solutions.
Benefits of using Job Order Costing
Putting a job order costing system in place might have various advantages for a graphics design
firm. Profitability analysis is one of these advantages. The agency can determine which projects
are the most profitable and decide which types of work to focus on in the future by carefully
tracking expenditures for each project (MSG, n.d). Adopting this strategy will also guarantee work
control and resource optimization. By successfully allocating resources, job order costing ensures
that designers and other assets are used. Additionally, it enables the agency to keep a close eye on
expenditures and take remedial action if a project starts going over budget.
Accounts Used in Job Order Costing
In a job order costing system, several accounts accumulate production costs for individual jobs in
a business. The raw materials inventory is one of these accounts. This account keeps tabs on the
price of supplies bought but not used in manufacturing (Tayler et al., 2023). Costs for materials
requisitioned for specific works are moved from this account to the Work in Process (WIP) account
when they are incurred. The Work in Process (WIP) Inventory is the following account (Tayler et
al., 2023). As work advances, the costs for all direct materials, direct labor, and overhead for a
given job are accumulated in this account.
Additionally, there is finished goods inventory and manufacturing overhead. This overhead cost
account helps compile manufacturing-related indirect costs. It consists of expenses such as rent,
utilities, and depreciation that are appropriately allocated to particular occupations using a suitable
allocation base (Tayler et al., 2023). A job’s entire cost is then moved from the WIP account to the
Finished Goods Inventory account after it is finished. This account shows the price of finished
services or products awaiting to be delivered to customers.
References
Tayler, W. B., Jones, J. P., & Warren, C. S. (2023). Accounting. Cengage Learning.
MSG. (N.D.). Advantages of Job Order Costing. (n.d.). Www.managementstudyguide.com.
https://www.managementstudyguide.com/advantages-of-job-order-costing.htm
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