For Professor Ryan Only

posted by Linda Moore

Sep 02, 2014, 11:20 PM

Donald - good description and examples! Process costing is a more continuous process also, and usually consists of similar products on an assembly line for example. Tis can be food items as your example, or consumer ggods, etc. A job order cost is a larger project where costs are accumulated as the job is going on, and is usually a longer term project; home construction, a road project, or this can be a custom automobile or motorcycle. This also will apply to a piece of custom jewelry, and also keep in mind that this is not always a larger item.

Class - what other examples of job costing can you think of?

· Comment on Sep 03, 2014, 8:46 AM

posted by DONALD DENNIS

Sep 03, 2014, 8:46 AM

To step out side the manufacturing industry, job costing would also be used in such industries as lawyers, doctors and accounting businesses too. I had a little hard time on the quiz separating the two, however this has now helped more.

A job costing is something that has no specific amount to be charged, until the work is done; whereas process costing is usually an already determined amount for the completion of something (such as mass amount of drinks in a factory).

· Comment on Sep 03, 2014, 1:23 PM

posted by Mark Pollack

Sep 03, 2014, 1:23 PM

The medical field is a wonderful example. When we had the animal hospital business, we factored the doctors time by minutes. We would determine the average minutes that specific appointments would take to complete. We used a number for the per minute charge and applied that to different scenerios. Therefore, a general wellness checkup was one standard cost, while a new puppy package was another. We also provided this analysis on surgeries.

I then took that information and added it to the per minute cost of the clinic during working hours. I used that data and combined it with the doctors cost. I knew what the clinic cost me per minute and was able to determine costs in that fashion.

· Comment on Sep 03, 2014, 2:14 PM

posted by SARA MARKEL

Sep 03, 2014, 2:14 PM

I think that can vary due to an emergency situation and the rate should increase with the level of technical skill involved, should this be based on individual need and the situation at hand. If the animal comes in off the street and a good samaritan happens to assist in the recover process is there a discount given and will the minutes be calculated at a different rate.

· Comment on Sep 04, 2014, 7:06 AM

posted by Mark Pollack

Sep 04, 2014, 7:06 AM

Skill and complication is definitely a factor. My point is that you will not know the base line costs without knowing your per minute costs. If someone came in who couldn't pay for services we had a few options:

1. Turn the patient away.

2. Provide the service at our cost- this is the per minute cost to run the clinic: Employees on the job, medications, ect

3. Use an angel fund we had for those who could not pay.

4. Payment plans.

We would evaluate each case that came in because a company can go broke by helping everyone who says they cant afford to take care of their pet. Sometimes its genuine and we help, other times its folks looking to just save money.

· Comment on Sep 04, 2014, 11:31 PM

posted by Linda Moore

Sep 04, 2014, 11:31 PM

Mark - Thank you for your example! This shows us how we can factor costs from any organization. You can tell after analysis approximately how long a medical procedure or exam takes; and in this way, a business can keep an eye on costs. If we don't perform this type of analysis, our costs can get away from us; and we can easily find ourselves out of business.

· Comment on Sep 04, 2014, 12:33 AM

posted by Linda Moore

Sep 04, 2014, 12:33 AM

Donald - good points. We automatically think of a factory but yes, every type of business can be examined in this way. The process costing is something that we usually develop a cost standard for. Then, the actuals will be compared to the standards set. Job costs for our business are accumulated costs; such as: in an attorney's office, costs for a particular client; the costs are accumulated based on the research needed to take care of the case, and to get the lawsuit brought to trial. If we have a personal injury lawsuit, we would have the doctor visits as costs, the attorney and staff's time and any other costs that apply; telephone, faxing, etc.

Class: Other examples?

· Comment on Sep 04, 2014, 1:44 PM

posted by DONALD DENNIS

Sep 04, 2014, 1:44 PM

Automotive manufacturing - Each vehicle should have a specific cost to build. In addition to that, destination charges are also applied to each location those vehicle end up going. So in this case, each vehicle delivered will have a variance of cost based on location delivered. Production cost should stay the same, but because of the various destination fees, automotive manufacturing would be considered Job costing, rather than process costing. My point here is, is that not all manufacturing or factories use just one method.

· Comment on Sep 03, 2014, 6:38 PM

posted by JASON YORGENSEN

Sep 03, 2014, 6:38 PM

Another example of job order costing can be a dentist office. At there office you pay for a service and depending on what you need it can cost a person. This job can be different from person to person allowing the dentist to decide what that price looks like. A cost for a dentist office can be different not only in the same office but different within other offices in the community.

Jason Yorgensen

· Comment on Sep 04, 2014, 1:08 PM

posted by JOHN RUIZ

Sep 04, 2014, 1:08 PM

When I think of activity based costing there are two types of products that come to my mind, electronics and mattresses. Both types of products are a combination of several parts all complied together to make one amazing product. The actual assembly of either product is just one step in the assembly process. Each part or component has their own individual assembly line. When you compile all of the parts together and the labor involved with all of the parts and divide them by each of the completed products, you then are able to determine the total price of product.

· Comment on Sep 02, 2014, 7:40 AM

posted by ANDREW WAREING

Sep 02, 2014, 7:40 AM

Job costing calculates the total production costs which can be attributable to a single unit or a group of units. An example would be a manufacturer who made ten units of a specific type of bed frame. The job order costs would include the timber, the labor and other parts needed for the manufacture.

Process costing is used for lengthy production runs of a standardized product. An example would be the manufacture of 10,000 paint-tins of white emulsion paint. With this method, the total costs of the oil and paint tins plus labor would be added together and divided by the number of units to calculate the process cost.

Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2011). Accounting tools for business decision making (4th ed.). : John Wiley & Sons Inc.

· Comment on Sep 02, 2014, 11:30 PM

posted by Linda Moore

Sep 02, 2014, 11:30 PM

Andrew - in your post, you talk about paint cans. If you think of this product, it has many facets. The tin itself is a material cost per unit; and the paint inside is a mixture; usually mixed in a different department. The labor on the production line has to be calculated; and divided by how many items can be made per hour or per shift. Once this cost is discovered, we can figure out our standard cost per unit. Then, in a shift or day, we can see how many were made, and then figure out what they should have cost us. The actual cost can be compared to our original standard cost, and a variance calculated. This can be material variances, or labor variances, for example.

Class: what other types of products can be made with process costing methods?

· Comment on Sep 03, 2014, 6:13 AM

posted by ANDREW WAREING

Sep 03, 2014, 6:13 AM

Any continuously manufactured similar product can use the process costing method. Other examples include processed food, automotive parts, computer chips and erasers. In these examples, the manufacturing costs are allocated to the functions of manufacture rather than to the specific product.

· Comment on Sep 04, 2014, 12:38 AM

posted by Linda Moore

Sep 04, 2014, 12:38 AM

Andrew - good examples. We have many products that can be made on a continuous basis, and the only thing is that we have to be sure to understand what this process costs us. What amount of items can be made in a time period? What is the labor cost for this? Then, allocation of overhead, which includes supervisory costs and also utilities, etc.

Class: What other types of costs would be considered overhead costs?

· Comment on Sep 04, 2014, 10:47 AM

posted by ANDREW WAREING

Sep 04, 2014, 10:47 AM

Overhead costs associated with manufacturing would include item such as direct labor, direct material and costs associated with running and maintaining the plant and facilities. The labor and material should be directly attributable to the product being manufactured according to GAAP.

Manufacturing overhead would include the employees and forklift operators, labor to set up and maintain equipment, Product inspectors, cleaners of the manufacturing area and management team associated with the manufacturing process.

Other items to be considered would be utilities associated with the manufacturing process, computer systems, insurance and property taxes and depreciation of the plant.

· Comment on Sep 03, 2014, 2:24 PM

posted by SARA MARKEL

Sep 03, 2014, 2:24 PM

Another product that I could think of right away would be a package of hamburger in a general store. If you think about it as the Instructor pointed out, there are many different methods and different processes that are required to being it to market. There is the base product which is the hamburger, which doesn't start out that way, it was a cow at one point. That cow had to be raised, fed, cared for, etc so right there you have the farm hands and members like that. You then have the people that handle the slaughter and process of the meat. Of course there is also the packaging of the material but unlike paint cans you also have the stickers and wording on the packaging, you also have the wrapping material as well. There are so many different cost structures to being a simple thing like a package of hamburger that people buy every day or week. I only named a few but you could write a book on the full process.

· Comment on Sep 03, 2014, 1:18 PM

posted by Mark Pollack

Sep 03, 2014, 1:18 PM

Job order processing is very different from process costing. Job order costing starts when unique orders are placed to an organization. Our class book referenced the cost of building a fire truck and how it will “assign” costs to each product used. Though building a fire truck or printing wedding invitations seems like ti could be “massed” produced, there are certain features that are unique to that project. Therefore, to ensure that the company is making money, they must price each item and compute the cost for each individual job.

Process cost systems are less unique and is used with many “mass produced” items. The book referenced Ben and Jerry’s ice cream. Ice cream uses the same materials, labor, overhead, and overall costs for every batch. Therefore, they can price their overhead through this process.

Both processes determine the cost of manufacturing a product. Overall, one is set for custom products while the other focuses on "mass produced" items.

· Comment on Sep 04, 2014, 11:39 PM

posted by Linda Moore

Sep 04, 2014, 11:39 PM

Mark - the idea of even wedding invitations is important to note. Each order is so specific; it has certain colors, materials, and print, that makes this completely unique, and therefore, a "job cost". These items cannot be mass produced.

Class: what other examples of job costing can you think of?

· Comment on Sep 03, 2014, 6:30 PM

posted by JASON YORGENSEN

Sep 03, 2014, 6:30 PM

Job order costing is a way for a business to assign a manufacturing cost to individual or groups of products. This form is used when products are not similar and have differences within them. Process costing adds together the direct cost of making goods and incorporates it in the price of the good. Process costing is more of an accurate way of costing products. This way allows for a company to know what the exact cost of an item is to ensure they are making the most money. Job order costing is more of a general way of costing a product. There is a large room for variation within price and it is not as accurate. This form of pricing can be used when businesses order in massive quantities.

Jason Yorgensen

· Comment on Sep 04, 2014, 12:41 AM

posted by Linda Moore

Sep 04, 2014, 12:41 AM

Jason - Job Order costing is more of a cost accumulation; of a project. The costs of materials and labor are added up as the project goes on, and the total is summarized at the end. This can be a special order piece of jewelry, furniture, home, car, etc Usually there will be some standard set, up front, to see how the costs are doing. We also will have a time frame set out, to follow. this is especially true of a large and lengthy construction project.

· Comment on Sep 04, 2014, 3:39 PM

posted by JASON YORGENSEN

Sep 04, 2014, 3:39 PM

Class,

I agree that job order costing is more than just cost accumulation. The costs can add up over time even with a restriction on what the costs will be. Also if the time frame is not met those costs can be raised than the agreed upon price. I think people have to understand that job order costing can accumulate more than what the possible agreed upon price.

Jason Yorgensen

· Comment on Sep 04, 2014, 11:54 PM

posted by Linda Moore

Sep 04, 2014, 11:54 PM

Jason - that is true; there is a plan for the job, but with weather or other delays, the job can go way over budget. There is a plan, for example, a house construction, that can go wrong! The wrong porch is put on, and has to be torn out, etc. A long term road project can go over budget due to material shortages, weather, or labor issues. ?

Class: Do you have other examples of job costing issues that can arise to create variances?

· Comment on Sep 04, 2014, 10:59 AM

WEEK THREE - DISCUSSION QUESTION # 2

posted by JOHN RUIZ

Sep 04, 2014, 10:59 AM

There are several similarities and differences between job order costing and process costing. Both systems of job order costing and process costing were developed for the similar purpose of designating overhead costs, labor, and materials for products and to develop a clear concept of individual unit product cost. Additionally both systems of accounting can be preformed by the same accountants as each system does not require specialization. The key differences between the two systems of job order costing and process costing is that process costing is a continuous process where job order costing is not.

In job order costing, there is a financial breakdown of all of the required elements and details of project involved with a job such as labor hours and materials. An example of job order costing would be maintenance repairs in the home. When you call for a estimate a technician comes to your home and provides you with a breakdown of the costs of materials, the labor involved, and any additional costs involved with a job. The technicians accountants would take all of the information involved when if a job is completed in order to pay the laborers and to ensure all of the paper was filled out correctly as well as to ensure the proper payment was collected.

In process costing the focus is initially less on an individual job and more about the entire process of completing an large work order such as an order from a factor of 1,000 computers. In process costing, each part inside of the computer has several costs and it is the total combined costs of all of the products that when combined that make a computer that is determining factor of the final cost of a computer.

· Comment on Sep 04, 2014, 10:14 PM

Response from Patricia

posted by patricia surber

Sep 04, 2014, 10:14 PM

Job order costing is taking a product and assigning it a manufacturing cost. The products are only giving a manufacturing cost if they are different from other products. A job cost record will report the materials and labor it uses on the making of the product plus the manufacturing overhead. A construction company is a perfect example of a business using job order costing because they use custom equipment and customer cabinetry.

posted by Linda Moore

Aug 19, 2014, 1:00 AM

*** WEEK # 3: DISCUSSION QUESTION # 2***

DQ # 2: DEFINE "ACTIVITY BASED COSTING".

WHAT ARE COST DRIVERS AS RELATED TO THIS FORM OF COSTING?

· Comment on Sep 02, 2014, 12:36 AM

W3Q2

posted by DONALD DENNIS

Sep 02, 2014, 12:36 AM

Activity based costing is an accounting method where activities performed are recorded then assigns to a product through indirect costs. It is hard to do this because you are accounting for management and staff working hours. This form of accounting has been more seen now a days in manufacturing part of the economy.

If this system is in other sectors of business, cost drivers (in this case salaries) will be seen quite often because it is a variable cost. In manufacturing, most costs budgeted for are fixed.

· Comment on Sep 02, 2014, 11:51 PM

Re: W3Q2

posted by Linda Moore

Sep 02, 2014, 11:51 PM

Donald - where I worked there was inter-company billing; and the one example that comes to mind is the allocation of the payroll department's costs. This is due to the fact that one department provided services for different divisions. This overhead cost was allocated, and billed out, per headcount. You can see that payroll services; hiring, insurance, payroll itself, would make the most sense to be allocated in this manner. One other aspect can be that we had a "data entry" department, which is a tedious job, and a lot of turnover. You can look at this and see that we would need a lot more of the payroll department's time and effort due to more interviewing, and advertising, phone calls, etc. This is a manner to allocate, but each situation is different.

· Comment on Sep 02, 2014, 7:39 AM

posted by ANDREW WAREING

Sep 02, 2014, 7:39 AM

Activity based costing is an approach that is used in modern manufacturing. With new technology, the costs associated with direct labor have reduced and the overhead costs associated with depreciation of expensive equipment, utilities and maintenance have increased. Overhead costs are assigned to activity cost pools and the pools are assigned to products and services (Kimmel, Weygandt, & Kieso, 2011).

Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2011). Accounting tools for business decision making (4th ed.). : John Wiley & Sons Inc.

· Comment on Sep 02, 2014, 11:46 PM

posted by Linda Moore

Sep 02, 2014, 11:46 PM

Andrew - in order to allocate the costs, we take the overhead cost, and figure out a way to spread these out over the units we have produced. We decide what way is best; should we use machine hours? Perhaps the cost should be per labor hour or dollars? This is usually decided by the particular organization and type of product we are producing. For example, if we are manufacturing automobiles, it would be sensible to use a "per unit" method. If we have a machine line manufacturing pencils, per unit might make no sense, so we can divide our overhead by labor dollars, or machine hours.

Class: Comments? Other examples?

· Comment on Sep 03, 2014, 6:23 AM

posted by ANDREW WAREING

Sep 03, 2014, 6:23 AM

I thought about this in context with the company I work for. I work for a software company and this industry has recently moved from a custom job order type costing method to one based on component and repeatable development. The same methodologies employed by traditional manufacturing can then be used to cost software and this has resulted in our company moving to an activity based costing system.

In researching this I also found a good article which provide the following definition of activity based costing "a method of measuring the cost and performance of activities and cost objects. Assigns costs to activities based on their use of resources, and assigns costs to cost objects based on their use of activities. " (Fichman & Kemerer, 2002, para 11).

Fichman, R. G., & Kemerer, C. F. (2002). Activity Based Costing for Component-Based. Information Technology and Management, 3(), . Retrieved from http://www.pitt.edu/~ckemerer/CK%20research%20papers/ActivityBasedCosting_FichmanKemerer2002.pdf

· Comment on Sep 04, 2014, 12:07 AM

posted by Linda Moore

Sep 04, 2014, 12:07 AM

Andrew - I would say that the software industry would fluctuate from job costing to work that is service related. It would be dependent on the type of project we are working on. If software is being developed for a large organization and is a huge project overall, this would be job costing. However, if you are working on existing software and making changes, this is a smaller job, and is best to be costed as activity based costing.

Class: comments or questions?

· Comment on Sep 04, 2014, 10:56 AM

WEEK THREE - DISCUSSION QUESTION # 2

posted by ANDREW WAREING

Sep 04, 2014, 10:56 AM

That's very true Linda - great point. The company I work for is focused on off the shelf Enterprise software so fits with the activity based costing method. We do occasionally engage in special projects where we generate custom code for specific customers. In these engagements we do indeed use job costing methods.

Even when we sell our off the shelf software we do use job costing to calculate the services we need to deploy the solution in terms of project managers, installation engineers and trainers.

· Comment on Sep 03, 2014, 8:56 PM

posted by Kierra Austin

Sep 03, 2014, 8:56 PM

Activity based costing first assigns costs to the activities that are the real cause of the overhead. It then assigns the cost of those activities only to the products that are actually demanding the activities. Some of the allocated costs may include managers and salaries. Cost drivers are the actual activities that cause the total cost in an activity cost pool to increase. The number of times materials are ordered, the number of production lines in a factory, and the number of shipments made to customers are all examples of activities that impact the costs a company incurs.

· Comment on Sep 04, 2014, 12:20 AM

posted by Linda Moore

Sep 04, 2014, 12:20 AM

Kierra - this is very important; because we want to assign costs "only to those activities actually demanding the activity" as you talk about. This is vital to properly cost our products, because we want to know what profits we are making, and from which products or activities in our business. This can be a very useful function, if managed properly.

· Comment on Sep 04, 2014, 11:59 AM

posted by JOHN RUIZ

Sep 04, 2014, 11:59 AM

Activity-based costing is system that is used to identify the indirect costs of products and services through the identification of the costs of all of the activities involved with the production processes by assigning the costs to individual product. In simple terms it is identifying the costs of all of the activities that are specifically involved with a product. Identifying the specific costs of a product through all of the actual activities involved with a product helps company properly price their products. Activity-based costing the processed through a refined approach where each activity is identified, the costs of the activity are applied, then the costs are distributed to the costs of the produced product.

· Comment on Sep 04, 2014, 4:45 PM