n03 - Chapter 3 Notes Page 1 Job-Order System There are...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 3 Notes Page 1 Please send comments and corrections to me at mconstas@csulb.edu Job-Order System There are basically two approaches to assign manufacturing costs to products produced or services rendered: Job-Order Costing and Process Costing. The approach that you use depends upon the character of your production operations. Products and services are often produced according to a customer's order. Because every job is different, the cost of each product or service will be different. Because of this difference in cost, you have to keep track of the cost of every job separately. This is what occurs with Job- Order Costing (also called Job Costing). Companies that typically use Job-Order Costing include print shops, law firms, accounting firms, doctors, construction companies, and film studios. In all of these cases, the firm keeps track of the cost of each job separately because each order is different. For example, in 1975 Universal Studios made both Jaws and the Columbo television series. The cost of these products differed greatly ($12 million vs. $600,000 per episode). Process Costing is used in assembly-line operations or where the products are standard. Because all of the products are the same, they should all cost the same to make. Therefore, with Process Costing you treat the average cost to produce the products as the cost of each unit. You do not keep track of the cost to make each unit separately. Not all operations are clearly Job-Order Costing or Process Costing. Think of a Nissan Sentra. They all have basic, common features that cost the same to produce (e.g., the body). Different models, however, have different engines, seat fabrics and/or sound systems. To the extent that all the Sentras produced have the same common features, Nissan can use Process Costing. To the extent that different models have different features, then they can use Job-Order Costing to keep track of the costs of the different features by model. This is called Operation Costing (also called Hybrid Costing). A recent survey found that: 51.1% manufacturing firms used Job-Order Costing; 14.2% manufacturing firms used Process Costing; 10.6% manufacturing firms used Operation Costing; and 24.1% manufacturing firms used Standard Costing. In Columbo Goes To College , two students get caught cheating. Naturally, they respond by killing their professor. Unfortunately for them, Lt. Columbo is the guest lecturer that night, and he solves the murder. DON’T EVEN THINK ABOUT IT!
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Chapter 3 Notes Page 2 Please send comments and corrections to me at mconstas@csulb.edu With Standard Costing, you use the estimated cost to make a unit as the cost of that unit. There is no need to determine the actual cost to produce your units. We will discuss Standard Costing in a later chapter. Components of Cost
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 01/13/2012 for the course ACCT 201 taught by Professor John during the Fall '08 term at CSU Long Beach.

Page1 / 12

n03 - Chapter 3 Notes Page 1 Job-Order System There are...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online