Question

let's say the Pentagon wants to know what the cost of the War in Iraq has been. It then wants to compare that to the cost of the War in Vietnam.

Do you think the U.S. government is more likely to use a costing system that is more closely aligned with Job Order Costing or one that is more closely aligned with Process Costing? Support your view.

Answer 1

If the U.S. government wants to know the cost of war in Iraq, then it must use a costing system that is more closely aligned with Job Order Costing. Every war may be considered as a separate job with its own features.

Every order in job costing is separate and it is not essential that the same manufacturing operations be carried out or the same materials be utilized in respect of each order. In the same manner, every war front is different where different strategy and accordingly different kinds of war equipments are needed

In the job costing system, an order or a unit, lot, or batch of a product may be taken as a cost unit, i.e. a job. In the same manner, every war is a cost unit.

In job costing, there is no averaging of costs except to the extent that in the ascertainment of unit cost, the cost of a lot of products in one order is obtained. A job or an order may extend to several accounting periods and job costs are, therefore, not related to particular periods. In the same manner, a war may extend to several years.

Process costing cannot be applied to calculate the cost of a war. In process costing, output of one process becomes input of the next process. There is no such sequence of processes in any war. Process costing fails here because the essential features of the process costing are missing here.

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