Discussion Board #2
Donovan Klein
Liberty University
Discussion Board #2
According to Blocher, Stout, Juras, and Cokins (2013), a costing system refers to “the
process of accumulating, classifying, and assigning direct materials, direct labor, and factory
overhead costs to products, services, or projects” (p. 97). There are a number of factors to take
into consideration when looking at a specific system for a company. For instance, the type of
industry, the goods and services offered but the company, the business model and strategy
adhered to by the firm, as well as the costs associated with implementing and maintaining a
costing system need to be taken into consideration by the company. However, according to Hicks
(2010), the primary concern is to ensure which ever system is selected is as fair as possible, and
representing the best allocation of costs for goods and services offered.
Two costing system options include job costing and process costing systems. The first, a
job costing system is “a product costing system that accumulates and assigns costs to a specific
job” (Blocher, et al., 2013, p. 901). A firm would be most likely to select a job costing system if
the costs can be easily identified as originating from a specific product, project, or customer
order. For instance, a company who completes a specific job for a client, would likely use a job
costing system. This might include a company completing screen printing on apparel, or a
construction company working on a specific building project for a client (Lister, 2015).
The second costing system, is a process costing system, which is “a costing system that
accumulates product or service costs by process or department and then assigns them to a large
number of nearly identical products” (Blocher, et al., 2013, p. 903). Most companies which
select this type of costing system produce larger quantities of a product and are usually
continuously conducting some type of manufacturing. For instance, companies in the food and
beverage industry would not find it practical to assign a cost to an individual product they
manufacture (Heisinger & Hoyle, 2012).
References
Blocher, E.J., Stout, D.E., Juras, P.E., & Cokins, G. (2013). Cost management: A strategic
emphasis (6th ed.). Boston, MA: McGraw-Hill Irwin Publishing.
Hicks, M. (2010). Accounting for decision making: A study guide. Roanoke, VA: Synergistics.
Heisinger, K. & Hoyle, J. B. (2012). Accounting for Managers (v.1.0). Retrieved from
http://2012books.lardbucket.org/pdfs/accounting-for-managers.pdf
Lister, J. (2015). What kind of business can use job costing? Houston Chronicle. Retrieved from
http://smallbusiness.chron.com/kind-businesses-can-use-job-costing-38870.html
