Question

Each analsis should has at least 200 words.

analyze 1. Explain “raw materials inventory” and provide a real life example from three different maunfacturing companies.

analyze 2.Explain the job order cost system. choose 2 additional different manufacturing companies that use the job order cost system. Explain why it benefits these 2 manufacturing companies to use this cost system for their type of inventory.

Answer 1

1. A manufacturing concern is required to maintain certain types of inventory for the manufacturing process. “Raw material Inventory” is one of such type of inventory.

“ Raw material Inventory” as the main suggest is the inventory which is in hand at a given point of time and is not included in either work in process or finished goods inventory. Ram material inventory is generally included in the inventory of the manufacturing concern since manufacturing concerns are required to maintain such inventory to avoid any disturbance in production process.

Raw material inventory can be of two types:

1. Direct Raw material inventory: These are those inventory which are directly used in the production of the product. Example of direct raw material inventory is fabric, spare parts etc.

2. Indirect Raw material : These are those types of inventory which are not directly incorporated in the production process . However, which are used during the production process. Example of indirect raw material inventory can be lubricant for machinery o light bulb.

Example of companies which maintains raw material inventory is real life is:

1. Companies like raymonds (Garment companies) required to maintain stock of raw material of fabric, buttons etc.
2. Print media companies like newspaper times maintain raw material inventory of newsprint and ink etc.
3. Equipment companies required to maintain stock of wiring etc

2. Job order costing is technique which is used to calculate the cost of each separate job irrespective of each previous job. This technique is used in the area where each job is different from each other and hence the cost structure of the each job.

Under job costing every customers requirement is treated as a separate job and customize job is done as per the requirement of the customer.

Although job order costing is primarily used in the service industry but it can be used in manufacturing concern as well on the basis of the need of the business.

Manufacturing companies uses the job order costing to control the usage of raw material and other related production activities.

Example of manufacturing companies which uses the job order costing can be :

1. Computer manufacturing companies: Companies like dell or HP can use the job order costing because requirement of each customer is different from each other and hence, the price of each computer will be different from the other one.

      For example a customer may require less RAM but other features but another customer requires Hi tech computer. So, Job order costing helps in such manufacturing.

       

2. Custom furniture manufacturing: Companies which manufacture furniture on the requirement of the customers will use job order costing. Because each order is different from each other.