Running Head: ACC 311 j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j 1
ACC 311: 3-2 Final Project I Submission
ACC311
Southern New Hampshire University
May 22,2022
ACC 311 j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j 2
Performance of SRS Education Press
The SRS Education Supply business utilizes a job costing approach, which has two direct
cost categories, including direct materials as well as direct manufacturing. There is also an indirect
cost pool that exists for manufacturing overhead, and it is allocated on the basis of direct
manufacturing labor costs. In the year 2017, the business entity had a profitable performance. The
strong financial performance was reflected in its gross margin of more than $ 3980 ($ 8000
(revenue) - $ 4020 (COGS). There was a 51.4 % profit margin for the company. Due to SRS’s
overhead costs, there was a minor extent of over-allocation. The strong financial performance of the
business enabled it to realistically and correctly predict and ascertain its overhead costs at 160 %.
After evaluating its financial information, a recommendation that I will make for the SRS company
is that it must continue with its in-house press production.
In case the cost accountants can ascertain the market attributes, the production as well as the
demand should remain the same in the following period of time. There is a chance that the firm can
lower its overhead costs for preventing over-allocated overhead costs. A measure that SRS can take
for disposing of any kind of overapplied overheads that may arise is by reporting them on its balance
sheet as ‘unearned revenue.’ At the end of a financial accounting period, the overapplied overheads
can be balanced by creating a credit to the cost of goods sold. A similar but opposite procedure can
be applied for underapplied overheads of the business during a period.
Two other Industries where job costing can be used
Even if the job order costing method is applied by manufacturing business entities, there are
other industries where it can be adopted to derive several benefits. For instance, it can be applied in
the automobile industry. This method will be beneficial in the specific industrial context because of
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the fact how automobiles and vehicles are constructed. In the specific scenario, the direct cost will
be related to the components that will be used for building the vehicles, and direct labor will be
related to the work undertaken by the crew throughout diverse stages of the automobile creation
activity. Cost relating to the equipment that will be used for automobile formation and the activities
of supervisors and managers at the plant at diverse activities will be the overhead manufacturing
costs. By using the costing method, automobile companies can account for the entire cost of
developing a vehicle during a time period and divide it by the total number of automobiles that have
been manufactured. Thus, it can arrive at the overhead allocation component. It is an ideal way of
accounting for all the expenses relating to automobile production, and the firm can ensure that it
operates profitably.
A firm operating in the legal sector can also use the job costing method. In this industry, no
product is involved. Instead, services are rendered on an hourly basis, and the expenses are related to
lawyers and employees. Overheads will be needed to run the office, and the shared facilities will be
divided between clients on the basis of estimated overhead. The costing method will help to break
down the charges and overheads and manage profitability effectively.
