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Financial Accounting Analysis

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** Please see the attached file for the requisite financial statements **

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.

The Sparklin Automotive Company (SAC) has been in business since 1930. It began business in the United States supplying spark plugs to automotive manufacturers (OEM, the original equipment market) and the automotive aftermarket.

SAC has introduced a new spark plug manufacturing process in the United States that produces a higher quality spark plug guaranteed to last 100,000 miles. The introduction of this spark plug has been very successful in the United States.

In addition to these types of projects, your responsibilities include creating and analyzing the monthly performance of each plant and consolidating the results into a set of financial statements footnoted with explanations.

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This solution provides a detailed sample financial analysis for the given financial accounting question.

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Please find guidelines and ideas for Sparklin Automotive Company (SAC) in the attached file.

There are different types of costing methods such as job order costing, process costing and activity based costing. Management and cost accountants can use any of these methods according to their business activities. Since 1930, The Sparklin Automotive Company (SAC) has been in business. It supplies Spark Plug to automotive manufactures in the United States. In order to increase sales of Spark Plug, SAC introduced a new manufacturing process to produce Spark Plugs that helps in producing high quality products. This paper discusses about the differences between process costing and job order costing. Further, it discusses about the recommendations to SAC related with use of job order costing.

Difference between Process Costing and Job Order Costing
Process costing refers to a costing system, which is used for homogeneous products. In order to calculate per unit cost, process cost averages the costs over all units (Kinney & Raiborn, 2010). On the other hand, job order costing refers to a system in which cost associated with a specific batch or order is traced to provide accurate and timely cost information to the managers (Hansen, Mowen & Guan, 2007). An important part of job order costing system is the set of electronic documents, accounts and procedures that an organization uses when it incurs costs for direct labor, overhead and direct material. There are some differences between process costing and job order costing, these differences are as below:
Direct Labor: In job order costing, according to a specification job skilled labor varies but in process costing repetition of unskilled worker is there who are a part of production processes (Crosson & Needles, 2007).
Environment: Process costing is suitable for those organizations in which products are produced through a mass production. At the same time, job costing is suitable for those environments in which organizations used batch production.
Material: For job order costing, required material varies from order to order. In contrast to job order costing, material require for process costing remains same for every order.
Cost per Unit: Cost per unit varies from order to order in job order costing but it remains same for all orders in process costing (Needles, Powers & Crosson, 2007).
Production Runs: In job order costing, each production run for short period ...

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