Job Order Costing System is a kind of costing method that is generally used by the manufacturing industries in order to keep track about the manufacturing process and the number of products that have been produced in a day or a batch. This part would therefore determine the appropriate situations that can be used for the purpose of Job Order Costing System
There are several scenarios within which the method of job order costing process can be utilised by the firms and even individuals. The process of job order costing is generally exploited by the organizations that have the capability of manufacturing various kinds of and number of products that are way different from each other. It is a kind of costing process that is used extensively in the manufacturing process along with the industries that are related to the service sector (Weygandt, Kimmel and Kieso 2015). The manufacturing units and organizations that are exploiting the process of job costing usually attain the orders for their tailored products and services. These orders that have been tailored by nature are called the jobs and the batches. When a company permits the orders and the jobs for different products, the allotment of the cost towards the product become a tough job. In this respect, the record for every expense for every distinct job is maintained due to the reason that each of the jobs have several products and services associated with it (Edmonds et al. 2016). The expense per unit of a distinct task is computed by dividing the total allocated cost to that job by the number of the distinct units related to the job. The three basic aspects of job order costing process is inclusive of the cost of labour, materials and the factory overhead cost.
The work-in-process balance is even known as the balance for the work-in-progress, which is the sum of all the expenses that has been put in the process of manufacturing the product that have been concluded partially (Schönsleben 2016). This even addresses the labour, overhead expenses and the raw materials that have been incurred for the products that are available at several stages of the manufacturing process. The balance for Turramurra Furniture has been depicted in the table below:
The Finished Goods are the products and the goods that have been finished by the production units or have been purchased in a completed manner, but it has not yet been sold to the consumers (Öker and Ad?güzel 2016). The goods that have been bought in the completed way are called the merchandise. The cost of the chairs that is available in the finished goods inventory is given as follows:
The under applied overhead takes place when a firm has overhead expenses more than their budgeted expenses. On the other hand, the over applied overhead costs takes place when a firm has their overhead expenses lower than the expected budgeted expenses (Tsai et al. 2014). The budgeted overhead is equivalent to the real hours worked in the predetermined rate of overhead. Hence, the computation of the over and the under applied overhead for Turramurra Furniture can be understood with the help of the table below:
In the above question, over applied overhead has been discussed and there has been an observation that there are various treatments that can be undertaken in order to treat such adjustments. The over applied overhead can be adjusted by carrying forward the amount to the account for the next period. The other process for adjustment can be costing the profit and the loss account and the amount may be written off (Navimipour et al. 2015). The next method for adjustment involves to the production, and a supplementary rate that can be worked out and can be applied. The treatment that can be used is given in the table below:
In order to resolve the issues that is related to the under and over utilisation of the overhead products, Turramurra Furniture Company has looked to debit the manufacturing overhead and the provide a credit to the cost of goods sold and the next adjustment of the production overhead has been debiting cost of the manufacturing overhead with the work in progress and then debit the work in progress along with the cost of goods sold (Kim, Schmidgall and Damitio 2017). These adjustments would be able to resolve the problems that is existent in the under and over application of the manufacturing overhead.
The process of activity based costing is one of the key accounting practices that have been exploited by the product and service industries and even by individuals. Hence, this section of the paper would explain this costing method.
The company is worried about their computation and the incorporation of the overhead and has the intention of making use of the Activity Based Costing as it has the intention of developing their range of products and is even worried about the application of the overheads. The Activity Based Costing is usually exploited by the production firms as it enhances the dependability of the cost information and hence the firms come close to the authentic and true expenses and improved classification of the costs that have been gained by the company during the process of manufacturing (Braun et al. 2014). The method of costing is utilised in the product costing, profitability of the customers, target costing and assessment of profitability and service pricing. This has been widely popular as the firms can construct an effective corporate strategy and the focus if the expenses are attained efficiently. The method of Activity Based Costing exploits various pools of costing controlled by the operations in order to assign overhead expenses (Joseph 2014). The knowledge has been that the operations are required to produce the products and assessing the finished products and accumulating the product. These operations can be costly and hence the costs of the operations require to be assigned to the product dependent on the use of the product activities.
An activity is a process that looks to make use of the overhead costs. The goal is to have knowledge about all the operations that is needed to produce the product for the firm. This process needs the overhead costs associated with each operation that is to be allocated to the operations (Gigler et al. 2014). Therefore, Activity Based Costing is useful for looking at the overhead applications and range of the products.
Conclusion
It can be addressed by looking at the discussion that have been made earlier that Job Order Costing is an efficient process of ascertaining the cost of various differentiated products. The administration has assigned the overhead to the expense of the product at an increased rate than the real rate of overhead. Conversely, the management can even make alterations on the over applied overhead in the various processes and under each of the processes, there would be a reduction in the cost of goods sold.
The organization can even optimise the issues associated to the allocation of the overhead by incorporating the Activity Based Costing process. It would assist the firm to assign the overheads according to the benefits attained by every product and even to ascertain the cost more effectively.
Reference List
Braun, K.W., Tietz, W.M., Harrison, W.T., Bamber, L.S. and Horngren, C.T., 2014. Managerial accounting. Pearson.
Butler, S.A. and Ghosh, D., 2015. Individual differences in managerial accounting judgments and decision making. The British Accounting Review, 47(1), pp.33-45.
Edmonds, T.P., Edmonds, C.D., Tsay, B.Y. and Olds, P.R., 2016. Fundamental managerial accounting concepts. McGraw-Hill Education.
Gigler, F., Kanodia, C., Sapra, H. and Venugopalan, R., 2014. How Frequent Financial Reporting Can Cause Managerial Short?Termism: An Analysis of the Costs and Benefits of Increasing Reporting Frequency. Journal of Accounting Research, 52(2), pp.357-387.
Joseph, M., 2014. Debt to Society: Accounting for Life under. University of Minnesota Press.
Kim, M., Schmidgall, R.S. and Damitio, J.W., 2017. Key Managerial Accounting Skills for Lodging Industry Managers: The Third Phase of a Repeated Cross-Sectional Study. International Journal of Hospitality & Tourism Administration, 18(1), pp.23-40.
Levine, B., International Business Machines Corp, 2017. Applying ordered modifications to recurring event instances. U.S. Patent 9,799,008.
Narayanaswamy, R., 2017. Financial accounting: a managerial perspective. PHI Learning Pvt. Ltd..
Navimipour, N.J., Rahmani, A.M., Navin, A.H. and Hosseinzadeh, M., 2015. Expert Cloud: A Cloud-based framework to share the knowledge and skills of human resources. Computers in Human Behavior, 46, pp.57-74.
Öker, F. and Ad?güzel, H., 2016. Time?driven activity?based costing: An implementation in a manufacturing company. Journal of Corporate Accounting & Finance, 27(3), pp.39-56.
Ramanathan, R., Microsoft Technology Licensing LLC, 2017. Interruptibility management via scheduling application. U.S. Patent 9,697,501.
Schönsleben, P., 2016. Integral logistics management: operations and supply chain management within and across companies. CRC Press.
Sy, A., Tinker, T. and Mickhail, G.M.E., 2015. US corporate management system and managerial accounting: a brief history of the aircraft industry company.
Tsai, W.H., Yang, C.H., Chang, J.C. and Lee, H.L., 2014. An Activity-Based Costing decision model for life cycle assessment in green building projects. European Journal of Operational Research, 238(2), pp.607-619.
Warren Jr, J.D., Moffitt, K.C. and Byrnes, P., 2015. How Big Data will change accounting. Accounting Horizons, 29(2), pp.397-407.
Weygandt, J.J., Kimmel, P.D. and Kieso, D.E., 2015. Financial & Managerial Accounting. John Wiley & Sons.
Essay Writing Service Features
Our Experience
No matter how complex your assignment is, we can find the right professional for your specific task. Contact Essay is an essay writing company that hires only the smartest minds to help you with your projects. Our expertise allows us to provide students with high-quality academic writing, editing & proofreading services.
Free Features
Free revision policy
$10Free bibliography & reference
$8Free title page
$8Free formatting
$8How Our Essay Writing Service Works
First, you will need to complete an order form. It's not difficult but, in case there is anything you find not to be clear, you may always call us so that we can guide you through it. On the order form, you will need to include some basic information concerning your order: subject, topic, number of pages, etc. We also encourage our clients to upload any relevant information or sources that will help.
Complete the order form
Once we have all the information and instructions that we need, we select the most suitable writer for your assignment. While everything seems to be clear, the writer, who has complete knowledge of the subject, may need clarification from you. It is at that point that you would receive a call or email from us.
Writer’s assignment
As soon as the writer has finished, it will be delivered both to the website and to your email address so that you will not miss it. If your deadline is close at hand, we will place a call to you to make sure that you receive the paper on time.
Completing the order and download