Question

1.Describe the cost per order system and mention two examples of companies that
they use this system.
2. Describe the cost per process system and mention two examples of companies that
they use this system.
3. Define what is the activity-based accounting system. Mention what they are
the companies that benefit from using this system and why.
4. Mention the importance of the analysis of variances in the cost system
standard. List and explain which are the variances that must be analyzed
when a product is manufactured or a service is provided.

Answer 1

Cost Per Order System

Cost per order (CPO) is the total calculated cost that is incurred by a customer making a purchase and determines profit made from a single order.

Cost per order, also called cost per purchase, is the cost of internet advertising divided by the number of orders. Cost per order, along with cost per impression and cost per click, is the starting point for assessing the effectiveness of a company's internet advertising and can be used for comparison across advertising media and vehicles and as an indicator of the profitability of a firm's internet marketing.

This is the cost to generate an order. The precise form of this cost depends on the industry and is complicated by product returns and multiple sales channels. The basic formula is:

Cost per order ($) = Advertising cost ($) / Orders placed (#)

Examples of Companies They Cost Per Order System:

• clothing factories,
• food companies,
• air craft manufacturing companies etc.

Examples of service businesses that use job order costing system include movie producers, accounting firms, law firms, hospitals etc.