Q – Please read the discussion below and prepare a Reply to this discussion post withcomments that further and advance the discussion topic.
Please provide the references you used.
Ensure zero plagiarism.
Word limit: 50 to 70 words please do not exceed the limit.
Discussion
Job Order Cost System
The system used to measure, trace, and report product costs is called cost accounting
systems. The job order cost and process cost systems are the main types of cost accounting
systems. The job order cost system provides the costs for each product unit and usually it is
used in custom, unique and batches of similar products such as clothing factories. On the other
hand, the process cost system provides costs for each manufacturing department and usually it
is used for similar or nonstop production processes such as oil plants, chemical and food
factories. The job order costing is used to set the selling prices of products, plan operations,
control operations, and create the financial statements. (Warren & Tayler, 2018)
The costs of production accumulate in an account called Work in Process. The Work in
Process account consists of three debits: direct materials, direct labor, factory overhead where
it accumulates the cost of produced item. Direct materials include materials used to the
produced items as integrated part of the product which are usually purchased as raw materials.
Direct labor includes the manpower cost of personal who is directly worked in the produced
item. For Factory Overhead, it includes all other costs which couldn’t be traced to the produced
item. The Factory Overhead is unknow since it requires multiple information, some of it to be
received in future such as electricity bills so it is estimated or predetermined. Companies use
multiple methods in their estimation which refers to activity where commonly they used the
following activity bases to allocate factory overhead costs: percentage of direct labor cost,
direct labor hours and machine hours. (Jonick, 2017)
Worth to mention that the Job order costing can also be used for service businesses such
as law firms and hospitals. In the service business, the service is unique for every customer.
The only difference is related to direct material where other direct expenditures could be
associated to the job or project such as supplies or travel costs. (Jonick, 2017)
References:
•
Warren, C. S. & Tayler, W. B. (2018). Managerial Accounting (15e). Cengage
Learning, Inc.
•
Jonick, C (2017). Principles of ACCOUNTING MANAGERIAL. University of
North Georgia
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