Costing Accounting System
bosshomework2015
effective_cost_accounting_system_2.pptxEFFECTIVE COST ACCOUNTING SYSTEM
This process establishes the true cost of materials, items and services
This baseline is critical to formulate profit margins and cost control measures, in addition to valuating your inventory
There are two cost accounting systems, job order costing and process costing – with a third option being a hybrid of both.
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JOB ORDER ACCOUNTNIG
Costs are calculated as a total for each individual job
You take every aspect of creating a commodity from raw materials, to assembly, overhead, inventory and shipping – factor all of that into one final amount for the job
This process is best used in business which have unique or special orders.
PROCESS ACCOUNTING
This is the means of calculating the costs of manufacturing through each individual process involved.
This is the most advantageous way to account for cost when mass producing a commodity in a repetitive way
The company can define how granular each process will be identified as
3
Hybrid Accounting
This is using a combination of both process and job accounting to calculate the cost of fabrication.
During the creation of your product, you may start with a universal product base, then customize it as it moves along.
An example of this can be car manufactures, where the base of a car is assembled, then breaks out to add options which would need to be uniquely calculated based on the final configuration
You can use the job and process accounting methods in the hybrid model in any order at any stage of the product, it just depends on the product your making.
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When and Where to Apply which style
Job order accounting- Some examples could be construction on a house, customized displays for sporting events, installation of solar panels
Process order Accounting - An example of this type of business could be an oil refinery, auto manufacturing or toy makers.
Hybrid Accounting - An example of this can be car manufactures, where the base of a car is assembled, then breaks out to add options which would need to be uniquely calculated based on the final configuration
