Question

When companies accumulate costs, they generally use either a job-order or a process costing system. The type of system used often varies based on the type of product or service provided.

Using the module readings, and the Internet, locate an article on how a company utilized a cost accumulation system.

Respond to the following:

Identify and describe the type of cost accumulation system that was used.

Explain how the system was used and, specifically, how overhead was allocated.

Discuss how the use of cost accumulation enhanced the company’s operations.

Answer 1

Benefits to the Company through cost accumulation
Through application of process costing system the company reduced its bookkeeping work as in this method unit costs are more like averages. It provides exact matching of the cost of the product against the revenues which are earned through related sales and ensures that the costs of the product are transferred from final goods to the cost of goods the has been sold as sales. (Hnasen, Mowen, & Guan, 2007) It is an effective and corrective measure providing maintain over the manufacturing process. Managers are provided with feedback which is used for month wise comparisons. It ensures that the costs are kept in line with the projected manufactured budgets. It allows the senior managers to identify and deal with the insufficiencies within the supply chain.IRS also uses the reports for tax computations. Application of the process costing enhances uniformity all along the organization and the members of the manufacturing supply chain are synced appropriately