Job Order Costing System
Thinking of the Middle East, identify at least one item that is most likely produced using job order costing, and one item that is most likely produced using process costing. Explain why you think each one would be produced under the system identified.
Job order costing is a system used to assign the manufacturing costs to an individual product especially when the products being manufactured are adequately diverse from each other while Process costing entails one method for accumulating and conveying the manufacturing costs to the units produced especially when closely related units are produced in large quantities (CeArley & Claunch, 2012).
In the Middle East, oil refining uses process costing since it requires production in large quantities which makes it difficult to differentiate the cost per individual unit of output hence requires job order costing (Kavanagh & Johnson, 2017). This means that the cost of every product is assumed to be equal the cost for every other product. The costs are amassed for over a certain period of time, summarized and then allocated to all the units produced in that period on a consisted basis. Thousands of gallons of similar oil are oozed out of the refinery every hour and assessing the cost per individual gallon is quite impossible hence this system is the most effective.
Furniture is produced using job order costing. Custom Furniture companies need to account for the labor, materials and other manufacturing costs associated with developing the product (Kim et al, 2017). For instance, the custom wood tables may require different designs depending on the intended purpose including the coffee tables, meeting room tables, and others. The sales price of each table differs expressively and thus job costing system is ideal as it records the costs and revenues got from each job. Each job at the furniture industries produces a distinctive product and requires different kinds of labor and material and accounting for all the costs requires this system of accounting (CeArley & Claunch, 2012). This helps the managers to determine the exactitude of the cost estimates in order to help in financial management and assess whether the job is profitable or not by reviewing the actual costs and revenues.
References
CeArley, D., & Claunch, C. (2012). The top 10 strategic technology trends for 2013. The
Top, 10. Press.
Kavanagh, M. J., & Johnson, R. D. (Eds.). (2017). Human resource information systems: Basics,
applications, and future directions. Sage Publications. Press.
Kim, N. H., An, D., & Choi, J. H. (2017). Introduction. In Prognostics and Health Management
of Engineering Systems (pp. 1-24). Springer International Publishing. Press.