Week 4_ dis 1

Rodgers:

The 3 costing systems in accounting are, job order costing, process costing, and activity based costing. In job order costing, each job has distinguishing characteristics and related costs. This type of costing is best employed for example in a movie production. Different costs are allocated or incurred for example, Actors, stunt people, set design, food caterers, location fees. Other examples

of industries to use this type of costing are advertising, patient health care.

Process costing applies to costs of similar products that are mass produced in a continuous fashion. For example beverage bottling companies (Coca-Cola), a set manufacturing process with specific ingredients and formulas already set, then the blending process and then to the filling or bottling step and labeling step. Other examples of industries that use this costing system include oil companies,

eg BP Shell, Exxon Mobil, also chemical companies.

Activity based costing (ABC), is an approach for allocating overhead costs. Allows overhead to multiple activity cost pools and then assigns the activity cost pools to products and services by means of cost drivers - Activity - Activity cost pool - Cost driver. A company manager often characterizes activities as belonging to one of the following four activity level groups when designing Activity Based Costing. Best business to use this model for example is construction business, different costs for Engineers, surveyers, architects, design, number of managed employees, salaries, taxes, depreciation, equipment rentals and costs, utilities.

References:

Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2016). Accounting Tools for Business Decision Making (6th ed.).

Preston:

There are two basic types of cost systems: Job order cost system & process cost system. A third option is

Activity-based Costing.

Job Order Cost system is a cost accounting system in which costs are assigned to each job or batch. To

my understanding an example of Job Order Cost would be a company modifying or doing a custom job

to meet a customers special needs.

Process-based Costing is an accounting system that applies cost to similar products that are

manufactured in large volumes. Industries that use this type of system are in food production, oil

refining and chemical processing. To be more specific an example is how refineries process crude oil into

gasoline.

And finally, Activity- based costing( ABC) is an approach for allocating overhead costs. The system is

used to help determine the overall cost of productions of a product in major volumes.

Refernces:

Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2015). Accounting Tools for Business Decision Making (6th

ed.). Retrieved from The University of Phoenix eBook Collection database.

https://www.patriotsoftware.com/accounting/training/blog/activity-based-costing-small-business