Company costing systems
Job costing system
Companies that manufacture distinctive products or services are likely to use the job costing system. In a job costing system, costs are assigned to different production jobs that are remarkably discrete. The job costing system links distinct costs to the end product or service. This system is used when products are manufactured on order or when separate costs can be traced to independent jobs; hence single product costs can be traced to the discrete tasks (Fullerton et al., 2014). Additionally, in the job costing system, a single work-in-progress inventory account is used; costs allocated to each job are tracked utilizing the job cost sheets. Examples of firms that use the job costing system include Boeing Company and Volkswagen (2014 custom campers). In the case of Boeing Company, products are manufactured on order, and the cost of producing an aircraft is linked to the final product. Similarly, for Volkswagen (2014 custom campers), the production of customized high-end cars was done on order, and the cost was linked to the end product.
Process costing system
The process costing system is used by companies that manufacture similar products (Chenhall & Moers, 2015). In the process costing system, costs are assigned to a single or several manufacturing processes. In the process costing system, information on the unit cost is obtained from the departmental production cost reports. According to Armstrong (2014), the process costing system utilizes different work-in-process inventory accounts, one for each department. Examples of firms that use the process costing system include the Coca Cola Company and Michelin Company. The Coca Cola Company is a mass producer of non-alcoholic beverages that are nearly homogeneous. The company uses the process costing system that assigns the production cost to every department. Equally, Michelin Company manufactures similar car tires, thus use the process costing system that links the production cost to every department.
References
Armstrong, P. (2014). Limits and possibilities for HRM in an age of management accountancy. New Perspectives On Human Resource Management op. Cit. At, 154-166.
Chenhall, R. H., & Moers, F. (2015). The role of innovation in the evolution of management accounting and its integration into management control. Accounting, Organizations and Society, 47, 1-13.
Fullerton, R. R., Kennedy, F. A., & Widener, S. K. (2014). Lean manufacturing and firm performance: The incremental contribution of lean management accounting practices. Journal of Operations Management, 32(7-8), 414-428.