Job costing: Does this supersede financial statements?
Not what you're looking for?
If you ran a job orientated business, carpet layer, home builder etc. and you implemented a rock solid job costing system in place. Let's say your goal is to have a 30% profit on all jobs and this includes allocating overhead. You check your report job costing reports daily to make sure all jobs are on track and you successfully hit your target of 30% profit on all jobs.
Certainly we will print and review are Income Statement and Balance Sheet but does the costing information supersede these reports? Please explain, additional example and references are helpful.
Purchase this Solution
Solution Summary
Your tutorial is 474 words and two references and argues that job costing information only shows a portion of the big picture. The discussion explains what is missing from job costing and job profits and what can happen if you ignore the non-product costs.
Solution Preview
Does the job costing information supersede the financial statements?
If you are a manager and you review the job costs and are satisfied that all the jobs meet the profit mark-up, you know that your gross margin is on target. And this is critical because that is the source of operating profits. Think about the income statement....starts with Sales and then deducts cost of goods sold to get gross profit. What comes after gross profit? More expenses! So, if you don't make the profit at the gross profit subtotal, you are not going to "make it up" with profits from something else. You might control expenses but that can only go so far.
Job costs only tell you about cost of goods sold (COGS), right? The job costs that are applied to work in process eventually end up in ...
Education
- BSc, University of Virginia
- MSc, University of Virginia
- PhD, Georgia State University
Recent Feedback
- "hey just wanted to know if you used 0% for the risk free rate and if you didn't if you could adjust it please and thank you "
- "Thank, this is more clear to me now."
- "Awesome job! "
- "ty"
- "Great Analysis, thank you so much"
Purchase this Solution
Free BrainMass Quizzes
Marketing Management Philosophies Quiz
A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.
Paradigms and Frameworks of Management Research
This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.
Business Ethics Awareness Strategy
This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.
Cost Concepts: Analyzing Costs in Managerial Accounting
This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.
SWOT
This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.