Question

Write an e-mail to your coworker explaining a topic related to this week's reading topics. A minimum of 3 paragraphs including a reference list.

Reading topics:

Job Order Costing: Calculating Unit Product Costs

Variable Costing and Segment Reporting: Tools for Management

Original work with APA references. Please

Answer 1

Subject:- Explaination of topics related to this week's reading topics

Dear Coworker,

1). Job Order Costing: Calculating Unit Product Costs:-

In managerial accounting, there are two general types of costing systems to assign costs to products or services that the company provides: “job order costing” and “process costing”. Job order costing is used in situations where the company delivers a unique or custom job for its customers. Every customer is treated uniquely and delivered products to specifically suit their individual needs.

For example, Coca-Cola may use process costing to track its costs to produce its beverages. In job order costing, the company tracks the direct materials, the direct labor, and the manufacturing overhead costs to determine the cost of goods manufactured (COGM).

One type of job-order costing is called actual costing. The actual costing system, like the name implies, is a costing system that traces direct and indirect costs to a cost object by using the actual costs incurred in the job. Although this system is much more simplistic, actual costing systems are not commonly found in real-world situations because actual costs cannot usually be determined in a timely manner because they are often not known until long after the job has been completed.

Written as an equation, job costing is calculated like this:

1. Total Job Cost = Direct Materials + Direct Labor + Applied Overhead.
2. Predetermined Overhead Rate = Estimated Overhead / Estimated Activity.
3. Total Job Cost = Direct Materials + Direct Labor + Applied Overhead.

2). Variable Costing and Segment Reporting: Tools for Management:-

Variable costing is a managerial accounting cost concept. Under this method, manufacturing overhead is incurred in the period that a product is produced. This addresses the issue of absorption costing that allows income to rise as production rises. Under an absorption cost method, management can push forward costs to the next period when products are sold. This artificially inflates profits in the period of production by incurring less cost than would be incurred under a variable costing system. Variable costing is a costing method that includes only variable manufacturing costs—direct materials, direct labor, and variable manufacturing overhead—in unit product costs.

Segment reporting is the reporting of the operating segments of a company in the disclosures accompanying its financial statements. Segment reporting is required for publicly-held entities, and is not required for privately held ones. Segment reporting is intended to give information to investors and creditors regarding the financial results and position of the most important operating units of a company, which they can use as the basis for decisions related to the company.

Under Generally Accepted Accounting Principles (GAAP), an operating segment engages in business activities from which it may earn revenue and incur expenses, has discrete financial information available, and whose results are regularly reviewed by the entity's chief operating decision maker for performance assessment and resource allocation decisions.