2.1) Your essay should explain the axiom, "different costs are relevant for different purposes" by...

Question

2.1) Your essay should explain the axiom, "different costs are relevant for different purposes" by briefly describing the process and job costing systems, and explaining the production context in which each system produces relevant and useful information for management.

2.2) In explaining the axiom above, you are required to explain the following differences between job and process costing systems:

2.2.i) The cost object for job costing is a contract, but the cost object for process costing is the process (or department). Explain the rationale for choosing these different cost objects for each system.

2.2.ii) How are costs accumulated under each costing system?

2.3) Then explain the following costing concepts that are found in process costing: 'equivalent units' and 'transferred in costs.' Why are these concepts not used in job costing?

2.4) Lastly, describe actual and normal cost-management systems. The indirect nature of overhead costs makes them difficult to control. Which system better enables management to control overhead costs? Explain.

Document Preview:

REVISED ACFI2003 Major Assignment, 2017 Due Date: 24 April 5pm Sydney time Assignment to be submitted via Turnitin (on Blackboard) Please note: Submission is via Turnitin on the Blackboard site. Students should allow at least 60mins to load up assignments as Turnitin will electronically cease accepting submission at 5pm. Late penalty will be applied for submissions made via email to course coordinator immediately after 5pm. Students should have completed tutorials 1 through to 5 prior to completing the assignment. Each assignment must have a university cover sheet with your workshop presenter’s (tutor’s) name clearly written on the cover sheet. This must be the presenter delivering the workshop that you are enrolled in. Workshop presenters will mark the assignments of the students formally enrolled in their classes. Submissions must be typed, not hand written, using 1.5 line spacing. The essay in question 2 has a word limit of 1,600 words (maximum). The School is aware that there are websites that provide answers to assignments for a fee. Students who utilise these services are short-changing themselves as they lose out on the learning that comes from investing personal effort in completing this assignment. This learning is critical in preparing for the final examination. Question 1 Kremel Co. produces a herbicide for lawns which also contains a weed killer. The product passes through four processes: combining, drying, mixing, and bagging. Two chemicals, X and Y, are added during the combining process. X is added at the beginning of the process and Y is added three quarters of the way through the combining process (75%). Labour and overhead are applied evenly throughout each process. After combining, the resulting product is sent to the drying department, where it is dried under heat lamps for 24 hours. After drying, the granulated product is sent to mixing where a fertiliser is mixed with the granulated herbicides. Finally, in bagging,...

005_xhqlazo-izoqfcrf.docx

David · Accepted Answer

“Different costs are relevant for different purposes.” is a relevant axiom. That is the simple 
reason why there are so many methods of costing. Two of these methods are called Job costing 
and Process Costing respectively. Under the concepts of Job costing , the cost is computed with 
reference to specific job as a whole. Under process costing, every process is treated as a different 
cost center and each process manager has a responsibility to control costs of his own process. 
Under process costing, the accumulation of cost is first carried process wise and ultimately final 
product cost gets computed in the last process only. Under job costing, cost is computed only in 
context of output created from a single customized process whereas under process costing, the 
input is required to pass through two or more processes before it becomes a final output. Hence 
under process costing it is desired to ascertain the cost per unit at the completion of each process. 
Under job costing, no intermediate cost controls are intended whereas in process costing cost 
control is planned at the level of each process manager. Even incomplete production (Work in 
progress) gets due importance under process costing. 
Under both the systems, the cost objects are different. Under job costing, the cost object is a job 
due to their customized nature. Under process costing the cost object is departments or processes. 
It is so due to the specific cost nature for each department. Job costing is suitable for the 
industries which produce products as per customer's order like restaurant, car repair shop. 
Process costing is perfect for the industries where mass production is done like sugar industry, 
chemicals industry. 
 Under job costing, all the costs are accumulated and ascertained on the completion of the job 
whereas in process costing , the costs are ascertained at the completion of each period and thus 
cost accumulation takes place process wise for each period. There is a need to identify normal 
losses, abnormal losses and abnormal gains. No cost is allocated towards the normal loss 
whereas the cost is certainly allocated for abnormal items. 
Following points further explain the differences in JOB COSTING and PROCESS COSTING- 
1. MEANING- Job costing is a basic method of costing where work comprises separate 
contracts, jobs and batches authorized by specific orders or contracts. Process costing is 
another basic costing method where costs are charged to the multiple processes and 
operations and then are averaged over the units that got processed. 
2. APPLICATION- Job costing applies when the production is carried as per specific orders 
of the customers. Process costing applies when the production is carried on continuously 
due to homogeneous products. 
3. DEPENDENCE IN PRODUCTION- Under Job costing, all jobs being done are 
independent of each other whereas in Process Costing, there is involvement of continuous 
flow and the products do not retain their individuality. 
4.

2.1) Your essay should explain the axiom, "different costs are relevant for different purposes" by briefly describing the process and job costing systems, and explaining the production context in...

Answer To: 2.1) Your essay should explain the axiom, "different costs are relevant for different purposes" by...

Answer To This Question Is Available To Download

Related Questions & Answers

Submit New Assignment