3-2 Assignment: Costing Methods   Companies choose their costing...

3-2 Assignment: Costing Methods  

Companies choose their costing method based on their business activities and processes, as well as the products and services they offer. A company can be a manufacturing, merchandising, or service organization; this also impacts which costing method will be most useful for its purposes. As a part of costing, the company also needs to decide how to classify overhead costs using either traditional or activity-based costing (ABC).

In this written assignment, you will choose a company, consider its business and costing requirements, and recommend a costing system that will work best for the business.

Think about a company you know. This could be a current or past employer or a company you admire. Consider its business activities and the type of products and services offered. Based on what you have learned so far, prepare a short paper that reflects on the different costing methods and speculates on how they might apply to your selected company.

Specifically, you must address the following rubric criteria:

  • Is it a manufacturing, merchandising, or service organization?
  • How could the costs differ if one method is chosen over the other?
  • If the company decides to use activity-based costing (ABC), what are some activity bases (cost drivers) it might use to allocate these costs?
  • Recommendation : Based on your analysis, recommend a costing method for the company, and explain why you think this method will work best for the business.

Please help with references

Answer & Explanation

  • Company Overview:
  • I have chosen XYZ Manufacturing Company, a company that specializes in producing customized machinery for various industries. XYZ Manufacturing is a manufacturing organization, as it is involved in the production of tangible goods.
  • Costing Methods:
  • Job Order Costing vs. Process Costing:
  • Job order costing is suitable for XYZ Manufacturing because it produces unique, customized machinery for different clients. Each job is unique, and costs can be traced back to specific orders. On the other hand, process costing is more suitable for industries where large quantities of identical products are produced, which is not the case for XYZ Manufacturing.
  • If XYZ Manufacturing were to use job order costing, it would be able to track the costs associated with each custom machinery order. This method provides detailed cost information for each job, allowing for accurate pricing and cost control. On the other hand, process costing would not be as effective for XYZ Manufacturing because it does not produce large quantities of identical items.
  • Factory Overhead:
  • XYZ Manufacturing may incur indirect or overhead costs such as facility maintenance, machine depreciation, and quality control. These costs need to be allocated to each job accurately. Traditional costing methods may allocate these overhead costs based on direct labor hours or machine hours. However, if XYZ Manufacturing opts for activity-based costing (ABC), it could use activity bases such as machine setups, quality inspections, or production runs to allocate these costs more accurately.
  • Recommendation:
  • Considering the unique and customized nature of XYZ Manufacturing's products, I recommend the use of job order costing. This method aligns with the company's business model, allowing for precise tracking of costs associated with each custom machinery order. Job order costing provides the detailed information needed for pricing decisions and helps in evaluating the profitability of each job.
  • Additionally, for allocating overhead costs, I suggest the implementation of activity-based costing (ABC). This method would enable XYZ Manufacturing to identify and allocate overhead costs more accurately, taking into account the specific activities that drive these costs, such as machine setups and quality inspections.
  • References:
  • Horngren, C. T., Datar, S. M., & Rajan, M. V. (2018). Cost Accounting: A Managerial Emphasis. Pearson.
  • Garrison, R. H., Noreen, E. W., & Brewer, P. C. (2014). Managerial Accounting. McGraw-Hill Education.
  • XYZ Manufacturing Company Overview:
  • XYZ Manufacturing is a renowned company specializing in the production of customized machinery for various industries. As a manufacturing organization, it engages in the creation of tangible goods, specifically tailored to meet the unique requirements of its clients. The company has gained recognition for its ability to deliver high-quality, custom solutions, making it a prominent player in the manufacturing sector.
  • Costing Methods: Job Order vs. Process Costing
  • Job Order Costing: Job order costing is a suitable costing method for XYZ Manufacturing due to the nature of its business. The company deals with customized machinery, each tailored to specific client needs. Job order costing allows XYZ Manufacturing to assign costs to each unique job or order. This method involves tracking direct materials, direct labor, and overhead costs for each job separately. In the case of XYZ Manufacturing, this means allocating costs associated with the materials and labor involved in creating customized machinery for individual clients.
  • This method provides accurate cost information for each job, enabling XYZ Manufacturing to set appropriate prices for its customized products. Job order costing facilitates cost control by revealing the specific expenses related to each project. The detailed breakdown of costs associated with each job is particularly beneficial for companies involved in unique and custom manufacturing, such as XYZ Manufacturing.
  • Process Costing: On the other hand, process costing is more suitable for industries where large quantities of identical products are produced. This method involves averaging costs over the entire production process, making it less suitable for companies like XYZ Manufacturing. In process costing, the costs are averaged across all units produced during a specific time frame, making it less precise for tracking the unique costs associated with each custom machinery order.
  • Differences in Costs Based on the Chosen Method:
  • Choosing job order costing over process costing can lead to significant differences in how costs are assigned and tracked. Job order costing allows for a more granular approach to cost allocation, providing detailed insights into the expenses associated with each job. This precision is crucial for XYZ Manufacturing, where customized products vary widely in terms of materials, labor, and complexity.
  • Conversely, if process costing were chosen, XYZ Manufacturing would face challenges in accurately determining the cost per unit for each custom machinery order. The averaging nature of process costing may result in distorted cost figures, making it difficult for the company to set competitive prices and evaluate the profitability of individual projects.
  • Factory Overhead and Activity-Based Costing (ABC):
  • XYZ Manufacturing incurs various indirect or overhead costs that need to be accounted for in its costing system. Examples of these overhead costs include facility maintenance, machine depreciation, and quality control. Traditional costing methods may allocate these overhead costs based on a single driver, such as direct labor hours or machine hours.
  • However, implementing activity-based costing (ABC) could enhance the accuracy of overhead cost allocation for XYZ Manufacturing. ABC identifies and assigns costs to specific activities that drive those costs. For example, machine setups, quality inspections, or production runs could serve as activity bases or cost drivers for allocating overhead costs. This method provides a more accurate reflection of how different activities contribute to overall costs, allowing for better decision-making and cost control.
  • Recommendation: Job Order Costing with Activity-Based Costing (ABC):
  • Based on the analysis of XYZ Manufacturing's business activities and costing requirements, I recommend the adoption of job order costing as the primary costing method. This choice aligns with the company's unique and customized manufacturing processes, providing the detailed cost information necessary for pricing decisions and cost control.
  • In conjunction with job order costing, I also recommend implementing activity-based costing (ABC) for allocating overhead costs. ABC would allow XYZ Manufacturing to identify specific activities driving overhead costs and allocate these costs more accurately to individual jobs. This combination of job order costing and ABC ensures that XYZ Manufacturing can maintain precise cost records for each custom machinery order and make informed decisions regarding pricing, resource allocation, and overall profitability.
  • Conclusion:
  • In conclusion, selecting an appropriate costing method is crucial for any company, and XYZ Manufacturing's unique business model makes job order costing the preferred choice. The customization and variability in the company's products demand a costing approach that can capture the specific costs associated with each job. Additionally, integrating activity-based costing for overhead allocation enhances the accuracy of cost assignment, providing XYZ Manufacturing with valuable insights for strategic decision-making. This recommended approach ensures that the company can maintain a competitive edge in the market while efficiently managing its costs and maximizing profitability.
  • Horngren, C. T., Datar, S. M., & Rajan, M. V. (2018). Cost Accounting: A Managerial Emphasis. Pearson. Garrison, R. H., Noreen, E. W., & Brewer, P. C. (2014). Managerial Accounting. McGraw-Hill Education.

Related Q&A

  • Q Compare and Contrast Beliefs and Practices for Teaching Culturally and Linguistically Diverse Students in the Americaniz... Answered over 90d ago
  • Q C. Examine the following mixtures: Identify whether homogeneous or heterogeneous. Describe the method of separating the ... Answered over 90d ago
  • Q  . Graff, Incorporated, has sales of $47,000, costs of $21,800, depreciation expense of $1,950, and interest expense of ... Answered over 90d ago
  • Q A P A formatting is required.   Supporting Mr. Hamilton, Part 1: Communicating With Clients With Expressive Dysphasia  J... Answered over 90d ago
  • Q   Identify the facts, issues, holding, and reasoning in a case brief for Prather v. Brand. Thank you!. Prather v. Brandt... Answered over 90d ago
  • Q Pathos (pathetic) appeal: invokes the audience's emotions to gain sympathy and  ultimately action and support. Ethos (et... Answered over 90d ago
  • Q Would anyone be able to help explain this? There is a difference among a definite transaction and a contingent transacti... Answered over 90d ago
  • Q Ina, who had a love of baking, decided to open her own bakery. She decided that she did not need and did not want to pay... Answered over 90d ago
  • Q 1. If economists say that monetary policies cannot affect GDP in the long run, what do they mean? Only fiscal policies c... Answered 69d ago
  • Q "The concept of Brand Equity is obsolete. Building equity is time-consuming, expensive and can be easily diminished. Bus... Answered over 90d ago
  • Q  . reaction type of reaction (check all that apply) O combination precipitation KOH (aq) + HCIO (aq) - KCIO (aq) + H, O(... Answered 85d ago
  • Q For this assignment, you will create a 5-slide PowerPoint presentation about your favorite hobby or pastime. You can cho... Answered over 90d ago
  • Q Nonprofit organizations face some unique HR challenges, such as: ( check all that apply ) Group of answer choices limite... Answered over 90d ago
  • Q for the first question explain in detail like how e^-0.725 and everything step by step please. Whereas for the second qu... Answered 8d ago
  • Q  . The steel bar has the dimensions shown. Figure 1 Figure 1 of 1 20 mm 30 mm 60 mm P r = 15 mm 24 mm- V Part A Determin... Answered over 90d ago
  • Q occurs when a student purposefully presents someone else's words, ideas, or other original materials without referencing... Answered over 90d ago

IMAGES

  1. 3-2 Assignment Costing Method complete

    3 2 assignment costing methods

  2. COSTING METHODS SUMMARIZED VERSION.pdf

    3 2 assignment costing methods

  3. Unit 2 Assignment 3.docx

    3 2 assignment costing methods

  4. Method of costing

    3 2 assignment costing methods

  5. ACC 202 Costing Methods

    3 2 assignment costing methods

  6. Exercise 5-3 Perpetual: Inventory costing methods LO

    3 2 assignment costing methods

VIDEO

  1. July 2023 Suggested Answers

  2. 3.2 Assignment: First Inversion Chords p. 79 (Wilder Amato)

  3. cost accounting b.com 3rd sem

  4. Budgeting and Costing Analysis Assignment

  5. Degree 5th Sem |Cost Accounting

  6. Rapid Revision and Question Solving

COMMENTS

  1. 3-2 Assignment-Costing Methods (ACC 202 Managerial Accounting)

    3-2 Assignment: Costing Methods Rebecca Coleman ACC 202-Managerial Accounting. Southern New Hampshire University. Company Overview: The company I selected to analyze and choose a costing method that bests fits their business activities, processes, and services they offer is Family Powersports, located in San Angelo, TX. I chose this company because not only are they located throughout Texas ...

  2. 3-2 Assignment Costing Methods Mangerial Accounting

    3-2 Assignment: Costing Methods Managerial Accounting May 23, 2021. 3-2 Assignment: Costing Methods Currently I am a Fulfillment Center Associate and Learning Ambassador at Amazon which is an e-commerce company that provides online retail service to consumers and sellers. Amazon is a merchandising organization that has partnered with many ...

  3. ACC202 Mod 3 assignment

    3-2 Assignment: Costing Methods Danielle Olinsky. Department of Accounting, Southern New Hampshire University. ACC 202: Managerial Accounting Professor Simona Citron January 23, 2022. Company Overview: I currently work for a plumbing company called Daniel's Plumbing Service. They are a service company that repairs and replaces plumbing ...

  4. ACC 202 3-2 Assignment Costing Methods.docx

    View ACC 202 3-2 Assignment Costing Methods.docx from ACC 202 at Southern New Hampshire University. ACC 202 - Managerial Accounting 3-2 Assignment: Costing Methods Joni E. Barefoot July 18th,

  5. 3-2 Assignment: Costing Methods Companies choose their costing

    3-2 Assignment: Costing Methods Companies choose their costing method based on their business activities and processes, as well as the products and services they offer. A company can be a manufacturing, merchandising, or service organization; this also impacts which costing method will be most useful for its purposes.

  6. 3-2 Assignment Costing Methods ACC-202-Managerial

    Question: 3-2 Assignment Costing Methods ACC-202-Managerial Accounting I am looking for some guidance for if I chose to write about the different costing methods of a local supermarket- Overview Companies choose their costing method based on their business activities and processes, as well as the products and services they offer.

  7. 3-2 Assignment- Costing Methods .docx

    View 3-2 Assignment- Costing Methods .docx from ACC 202 at Southern New Hampshire University. 3-2 Assignment: Costing Methods Company Overview: Identify the company you selected and provide a

  8. 3-2 Assignment Costing Methods.docx

    3-2 Assignment: Costing Methods 2 am currently employed by UPMC and " UPMC, a $23 billion world-renowned health care provider and insurer based in Pittsburgh, PA, is inventing new models of accountable, cost- effective, patient-centered care (UPMC Facts and Stats, n.d.)."UPMC is the largest nongovernmental employer in PA. UPMC serves not just its patients but also helps in the community.

  9. ACC 202 3 2 Assignment Costing Methods

    3-2 Assignment: Costing Methods Yvonne Mayorga Southern New Hampshire University ACC 2020 Managerial Accounting November 14, 2021. ACC 202 Managerial Accounting 3-2 Assignment: Costing Methods. Company Overview: The company I have chosen is Rodan and Fields. It is American manufacture and multi- level marketing company.

  10. 3-2 Assignment

    1 Accounting 202 Managerial Accounting: 3-2 Costing Methods Kelli Boyer Southern New Hampshire University ACC-202-R2934 Queena Jenkins November 14, 2021. 2 Non-profit organizations can be very complex and cumbersome when it comes to maintaining and recording costs. I worked for a nonprofit organization that provided many different services to ...

  11. 3-2 Assignment Costing Methods a.docx

    Managerial Accounting 3-2 Assignment: Costing Methods July 15, 2023 Company Overview I chose Amazon for my company to analyze for costing methods. Amazon was my choice because the company is a highly used company in my household. Amazon sells just about a

  12. Acc202 3-2 Assignment Costing Methods.docx

    3-2 Assignment: Costing Methods By: Alyssa A. Morales The company I selected to do this overview on is called Connecticut Hospice. This is a well-established company that provides services to patients in their own homes along with running an impatient hospital almost at the center of its 5-mile service radius. This company appears to be a service organization that provides various services for ...

  13. ID 2442859 3-2 Assignment Costing Methods (Final Submit)

    Accounting document from Southern New Hampshire University, 6 pages, Running head: COSTING METHODS 3-2 Assignment: Costing Methods Jeannette Rivera Southern New Hampshire University ACC-202: Managerial Accounting Professor Ronald Cade March 19, 2023 COSTING METHODS Walmart has expanded to become the biggest retailer globa

  14. ACC-202, Assignment 3-2 Costing Methods

    3-2 Assignment: Costing Methods Albert DeSena ACC 202: Managerial Accounting Southern New Hampshire University Dr. Ronnie Aumann July 19, 2022. Abstract Company Overview. Amazon sells every conceivable product. As a consequence of this, there is a widespread misunderstanding that something does not exist if it is not offered for sale on Amazon.

  15. 3-2 Assignment Costing Methods (docx)

    2 Module Three Assignment: Costing Methods Introduction For this assignment, costing methods will be discussed. Companies must use costing methods to determine the cost of production or services that they are providing. The company's business activities as well as their process will determine the type of costing method that they will implement. . Therefore, the following items such as a chosen ...

  16. 3-2 Costing methods.edited.docx

    2 3-2 Assignment: Costing Methods To explain in detail different costing methods are applied and used by various companies, I chose to look closer at Levi Strauss & Co. Levi Strauss & Co., which mostly goes by Levi's, is a manufacturing company with its focus on denim jeans but over time also has expanded into offering a variety of different clothes.

  17. Costing Methods- Module 3- ACC202

    3-2 Assignment: Costing Methods Module 3 Managerial Accounting - ACC The appropriateness of the costing method utilized is contingent upon the organization's type and its specific method and approach. The company's costs can vary based on the type of business they are in, and they will need to tailor their costing methods accordingly.

  18. 3-2 assignment costing methods (docx)

    Accounting document from Southern New Hampshire University, 4 pages, 3-2 Assignment Costing Methods Raven Lange ACC 202: Managerial Accounting Southern New Hampshire University Professor Hancock 1/23/22 Company Overview The company I choose to analyze for this assignment is Burberry. Burberry is global luxury PLC that des

  19. ACC 202 Module 3-2 Assignment Costing Methods

    Module 3-2 Assignment: Costing Methods If you think about every company that you have worked for, regardless of the type of business it is, you will see that each one had its own form of assigning costs to their products. Each company within each industry decides what type of costing method they will choose for their company. There are three types of costing methods used: Single Plantwide Rate ...

  20. 3-2 Assignment Costing Method complete

    3-2 Assignment: Costing Method. The company that I chose to look at is Wise Environmental Solutions, Inc. I chose this company because my fiancé works for them, and I work for them when they have special events like concerts or the big race at Talladega Super Speedway in Talladega, Alabama. Wise Environmental Solutions is a service ...

  21. 3-2 Assignment Costing Methods (docx)

    ACC-202 Managerial Accounting 3-2 Assignment: Costing Methods The company I am choosing for this assignment is my own place of employment called Meggitt Engine Systems. Meggitt is a manufacturing plant that produces an assortment of mechanical, hydraulic, fluid, and electronically actuated aerospace valves that go into personal, commercial, and military platforms.

  22. 3-2 Assignment

    View 3-2 Assignment - Costing Methods.docx from ACC 202 R4551 at Southern New Hampshire University. The company I choose to overview its costing methods is Corder Drum company located in Huntsville,

  23. Studocu

    301 Moved Permanently. openresty

  24. 3-2 Assignment-Costing Methods (1) (docx)

    The Process Costing Method is used for large scale manufacturing. The Process Costing Method helps determine the total production cost for each unit of product (Vaidya, 2022). The product costs are allocated to the department each item passes through instead of tracing the cost to each individual item produced. Since the Process Costing Method is.