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BUS 3304
Nov 4, 2023
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Managerial Accounting Discussion Assignment Unit 3 What types of companies use job order costing? Please provide at least two examples. What types of companies would use process costing? Please provide another two examples. What are the similarities between job order costing and process costing? What are the differences? The job order costing technique is a way of pricing used by businesses that generate one-of-a-kind, bespoke items or services. It is suited for businesses that produce goods or deliver services in response to particular client orders or projects. Two corporations that are examples of businesses that employ task order costing are as follows: Companies specializing in construction should know that most projects are unique and demand individualized supplies, labor, and overhead expenses. Through the use of job order costing, construction businesses are better able to monitor the individual expenses of each project. Advertising agencies Advertising agencies are responsible for developing individualized marketing strategies for their customers. Because every campaign is one of a kind, it calls for a diverse set of resources, including production, media purchasing, and creative services. Using job order costing, advertising companies may assign expenditures to each client's campaign more effectively. Process costing is a way of costing used by businesses that generate consistent quantities of similar goods or services continuously. It is excellent for businesses that create huge volumes of items that are identical or very similar to one another and have standardized manufacturing methods. Two firms that are examples of those who employ process costing are as follows: Firms that process food generate huge numbers of standardized food items, such as canned foods or frozen meals. Food processing firms produce enormous volumes of standardized food products. Utilizing process costing allows companies to more accurately assign costs to individual units of production based on the overall average cost of the manufacturing process. Refineries are facilities that convert crude oil into various petroleum products, including gasoline, diesel, and jet fuel. Refining encompasses several phases and results in producing huge quantities of consistent goods. Oil refineries can calculate each petroleum product's cost per unit of production with process costing. Comparison of the Job Order Costing Method with the Process Costing Method
The following is a list of parallels that may be found between task order costing and process costing: When calculating the cost of manufacturing, both of these techniques are considered. Both approaches need the allocation of direct materials, direct labor, and overhead expenditures to function well. Calculating the cost per output unit is the goal of each of these approaches. Costs must be accumulated in either a cost ledger or an account, regardless of the approach used. Costing based on job orders and processes has a few key differences. The following is a list of the primary distinctions that can be made between task order costing and process costing: Job order costing is used for goods or services that are personalized to the customer's specific needs and are one-of-a-kind, while process costing is used for products or services that are standardized and uniform. While process costing determines how much it will cost to produce each unit, task order costing keeps tabs on the expenses associated with each project or work. Using job order costing, costs are assigned according to individual client orders or projects. Still, when using process costing, costs are assigned according to the overall average cost of the manufacturing process. Job order costing necessitates using job cost sheets to keep tabs on expenses associated with each task. In contrast, process costing relies on production cost reports to compute costs associated with each output unit. To summarize, firms that generate customized goods or services use work order costing, while companies that produce standardized products or services use process costing. Both methods are employed by businesses that earn revenue. The distribution of costs is required in both approaches, but the nature of the items or services being sold and the approach used to allocate costs are quite different in each case. 663 words
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