Question

Part A Choose ONE of the costing systems studied in this unit from the list below, and answer the questions that follow: • Job Costing • Process Costing • Operation Costing (Hybrid Costing) • Activity-based Costing (ABC) Questions: 1. Briefly discuss the features of your chosen costing system. 2. Identify 2 specific Australian companies that your chosen costing system is suitable for, and explain why. 3. Discuss two potential uses of the cost information for decision-making, to the managers in each of the 2 organisation selected in Q2 above. Part B Choose one peer reviewed journal article (from any country) on the: Use of your chosen costing system in a real-life organisation (i.e. a case-based empirical study). The article should be published between 2005 – 2020. Choose your article only after you have accessed and reviewed several relevant articles, and then choose the best article that will answer the questions below. Questions: 1. Based on your chosen costing article, briefly summarise how the costing system was designed and implemented in your real-life organisation. 2. Based on your chosen costing article, did the costing system in the study satisfy the features discussed in Part A (Q1)? Why or why not? Include examples in your answer from your costing article. 3. Based on your chosen costing article, how useful was the cost information to the internal users in the organisation? Discuss with examples from your costing article. 4. Based on your literature findings, state two key lessons that would inform contemporary organisations about the practical use of your chosen costing system.

Answer 1

1.Process Costing..

2.A process costing system is used by companies that produce similar or identical units of product in batches employing a consistent process. Examples of companies that use process costing include

Chevron Corporation (petroleum products),

the Wrigley Company (chewing gum), and Pittsburgh Paints (paint).

Process costing is a management accounting function. Business owners use this function to accurately calculate and apply the business costs for producing specific types of goods. Process costing provides a costing system for homogenous goods, which usually have little differentiation from one item to the next. Paper, petroleum, chemical, textile, lumber and food processing industries commonly use process costing. The weighted average method is the most common process costing system used in practice. This method includes a few basic steps when costing products.

*Flow of Units

Process costing relies on a very distinct flow of units through the company’s production system. Homogenous goods usually flow through several various production processes. Each process has a specific amount of costs associated with producing products. Costs can include direct materials, production labor and manufacturing overhead. These items represent the direct costs related to the specific production of goods.

Calculate Equivalent Units

Equivalent units represent the number of items completed during each stage of the production system. Process costing uses equivalent units as a measuring stick because inevitably some units will be incomplete at the end of an accounting period. Incomplete units are calculated based on the percentage of completion.

Unfinished equivalent units in process costing systems represent work-in-process.

Compute Unit Costs

Computing individual unit costs in process costing is a fairly basic process compared to other cost accounting methods. The basic cost calculation is work-in-process plus costs incurred for the month divided by total equivalent units.

Cost Analysis

The final stage of process costing is analyzing the total cost of the process costing system. Companies often review each production process to ensure all costs or properly allocated to each the equivalent unit. This analysis includes a review of the work-in-process account, which represents beginning inventories at the accounting period.

3.The cost information system plays an important role in every organization within the decision-making process. They are:-...

*The detailed analysis of costs,

*the calculation of production cost,

*the loss quantification,

*the estimating of work efficiency provides a solid basis for the financial control.