Share
Explore BrainMass

SAC

SAC has developed revolutionary manufacturing techniques utilizing its new spark plug manufacturing technology to offer special-order spark plugs for the auto racing industry. The company is currently using process costing for its spark plugs but is considering using job order costing for the new specialty spark plugs. How does job order costing differ from process costing? Should SAC use process or job order costing for the specialty spark plugs? Make a recommendation for SAC. Be sure to fully back up your recommendation.

Solution Preview

The response addresses the queries posted in 1850 words with references.

// Prior to distinguish job order costing from process costing, we have to firstly, understand the meaning of costing, which assists in finding out exact or true cost. In this part, we will talk about the various costing methods. So, initially, we write about the meaning of costing & its methods under the heading of Introduction, for example: //

Introduction:

Costing is defined as the process or technique of determining the product cost. It mainly consists of principles and rules, which are chiefly applied for finding out cost of manufacturing a product and cost of providing services. It is simply cost finding, which can be carried out by means of memorandum statements, arithmetic process, etc. For the accurate finding out the costs of products & services and for the demonstration of appropriate critical financial information, the method of costing is applied, so that cost can be easily classified, recorded and also amount of expenditure is suitably apportioned.

This concept must be accurately understood by the managerial team because it plays a vital role in controlling, directing and arriving at effective decisions. The way in which goods & services is costed or recorded must be conceived because it has a significant affect on accounted profits and also major decision pertaining to the management. The costing system mainly furnishes the financial data related to the cost i.e. producing and distributing cost of the products & services to their consumers. This assists the management team in controlling and managing the cost of production (Lucey, 2002). Job costing, contract costing, process costing, operational costing and batch costing are the different methods of costing. It basically considers the cost ascertainment of the different costing methods i.e. order, contract, job, process, service or unit as may be appropriate. It helps in effectively controlling the selling cost, production cost, distribution cost, etc.

//Above, we discussed about the term costing and its different methods. As per directions, now we will discuss about the difference between job costing and process costing, in order to key out the benefits which are suitable of the SAC Company. You are free to add more information that you find suitable. I am just affording you an overview; so that you can interpret this. //

Difference between Job Costing and Process Costing:

Both methods of costing i.e. job costing and process costing is exclusively different from each other. Job costing is defined as a method that is mainly applied by those manufacturing concerns, where an order is produced to a consumer specification. In this method, no two orders are necessary alike and all orders do not pass through the same manufacturing process. On the other side, Process costing is defined as a system of costing that is mainly applied by the manufacturing units, where the input of raw material in the first process moves on by ...

Solution Summary

The response addresses the queries posted in 1850 words with references.

$2.19