Module 03 Project - Fixed and Variable Costs

11/23/17

Accounting Costing Methods

Accounting methods that help a business person understand both input and output values in the manufacturing or production process are termed as costing methods. They are very essential in the management of any business most especially managerial accounting (Ueno, & Scarborough, 2016). Financial statements are a summarized report showing how a company or a business has utilized its funds and its present financial status.

From my review on the balance sheets, income and cash flow statements and business financials of a manufacturing company, the following are the costing methods that a manufacturing company should use.

Process costing which is commonly used in big production situations. The total cost of the process of manufacturing is analyzed by a process cost method (Shen, Griswold, Suri, Vosti, & Rogers, 2017). For instance, the gross cost of packing books into a box over a certain period that is clearly specified by the company. The unit cost for packing the books is the net cost gained while packing all the boxes all through the period divided by the number of boxes packed. The same calculation is done for each step to reach the unit cost mean for the whole manufacturing system since the process involves many steps (Ueno, & Scarbrough, 2016).

Secondly, the activity based costing method which is a supplementary method to the process costing method and some other traditional costing methods. Unlike the traditional techniques that categorize costs generally, the activity based costing method groups every cost linked with each manufacturing duty, irrespective to whether they are grouped below the titles of labor or any other thing. For example, when boxing books, the costs take account of the operating machines, carrying out excellent checks and many other activities that are involved in the whole process.

The costing methods above are suitable for the manufactured products since the management can easily find out the costly tasks and the ones that were significant during the process. The techniques also can show un-balanced amount of money was used in invaluable activities hence the management can change the process to do the activities cheaply.

References

Shen, Y. K., Griswold, S., Suri, D., Vosti, S. A., & Rogers, B. (2017). Costing Methods for a Cluster-Randomized Cost-Effectiveness Trial Comparing the Performance of Four Supplementary Foods in Treating Sierra Leonean Children with Moderate Acute Malnutrition (MAM). The FASEB Journal, 31(1 Supplement), 786-55.

Ueno, S., & Scarbrough, D. P. (2016). Japanese Management Accounting: An Overview of Current Methods and Practices.