Costing systems are components of a broader accounting system used by a given company or organization. The main function of the costing system is to keep a focused eye on expenditures made by the company. While the data that is collected and generated by the costing system is also integrated into the overall accounting system, the costing approach allows for easy extraction of the data for reports to upper management. As business became more complex and began producing a greater variety of products, by the use of costing system perfectly.
Actually, an accounting system established to monitor a company’s costs, providing management with information on operations and performance. Costing systems are components of a broader accounting system used by a given company or organization. The main function of the costing system is to keep a focused eye on expenditures made by the company. While the data that is collected and generated by the costing system is also integrated into the overall accounting system, the costing approach allows for easy extraction of the data for reports to upper management.
The information that typically is gathered by a costing system allows owners and managers to quickly identify the current status of two key factors that are relevant to the success of the company. Operational costs are often the foundation of the data collected by a costing system. Here, management is able to get a snapshot of all expenditures that are directly connected with the general operation of the organization, especially in terms of production costs. A second important bloc of information that is retrieved with the use of a costing system is performance cost.
Here, management is able to view any and all expenditures that are related to helping the company remains profitable, less the direct cost of operations. Expenses associated with marketing, public relations, and sales efforts are examples of the type of expenditures that are captured in the performance cost module. A costing system is not intended to replace an counting system. Instead, the systems actually work within the broad framework of general accounting systems to extract specific data for quick and easy analysis.
By making use of a costing system, it is possible to quickly identify expenditures that were intended to benefit the company, but are failing to do so in a significant way. This makes it possible for owners and managers to make the necessary adjustments to the compass working strategy and thus exercise a more responsible use of available resources. Conclusion: Costing system is an important part of any business or engineering company. It is important for a company to be able to exercise Business became more complex and began producing a greater variety of products, when the system applied perfectly.
So, for a development a company costing system should be followed. Question 2 company and calculate the cost per unit for your product/service. It is very important to choose any perfect costing system for any company. For any modern business enterprise needs to have in place in effective costing system that take into account the real cost of manufacturing the product or delivering the service that it provides. There are mainly four kinds of costing yester. Here have shortly described all the 4 types of costing system then I have identified the appropriate costing system for my company.
Job costing: Job costing is a very simple costing technique. It usually applies to a unique operation, such as fitting a part or carrying out a medication to a product. Typical operations in which job costing is commonly used include: ; supplying a unique or ‘one-fitted; ; painting and decorating a building; ; converting or adapting a product to meet a particular customer’s requirements. Job costing always has at least three elements: direct labor; erect materials and absorbed overheads. Sometimes there is an additional direct cost-direct expenses.
Contract costing: Contract costing relates to larger jobs (so is conceptually the same as job costing) and is longer lasting. Contract costing is usually used for thingies civil engineering, shipbuilding, and defense. Contract costing isomer complex than job costing. Parts costing: Parts costing is straightforward and is simply a question of determining the cost of all of the physical parts and components used in a manufactured or engineered product. Parts costing works from the ‘bottom-up’-in other words, he cost of each individual component (I. E. He per unit cost) is determined on the basis of the given standard supply multiple. Process costing: Process costing takes into account the cost of a continuous manufacturing process and apportions part of the cost of each process to an individual product. Typical processes might be: ; forming, bending, or machining of metal and plastic parts; ; flow soldering of Pubs; ; heat treatment of metal parts; ; paint spraying and finishing. Process costing is used in industries that operate on a continuous basis, such as chemical plants, petroleum, or food production.
In order to carry out process costing it is necessary to show how the flow of products is cosseted at each stage of the process; Process 1 , Process 2, Process 3, and so on to the finished product. Appropriate costing system for my company: Two basic types of manufacturing processes are the job order approach where each order is customized, and mass production, where the product is always the same. To accompany these procedures are the two traditional types of cost accounting systems: 1) job order costing system; and 2) Process Costing System. The name of my company is Pad Oil Company.
It is a large manufacturing many. And I have chosen the process costing system for my company as a appropriate costing system. The information captured by these cost accounting systems aids managers in determining total production costs. Process costing system used by manufacturing companies that produce homogeneous product. Other manufacturing companies that produce various similar products also use the same costing system. I have selected these system for um company because, A company may manufacture thousands or millions of units of product in a given period of time.
Product costs must be transferred from Finished Goods o Cost of Goods Sold as sales are made. This requires a correct and accurate accounting of product costs per unit, to have a proper matching of product costs against related sales revenue. Managers need to maintain cost control over the manufacturing process. Process costing provides managers with feedback that can be used to compare similar product costs from one month to the next, keeping costs in line with projected manufacturing budgets. A fraction-of-a-cent cost change can represent a large dollar change in overall profitability, when selling millions of units of product a month.