Cost accounting systems are also referred to as product costing system or simply costing systems is a system that is utilized by companies as a measure to help managers track the cost activities of the products that they manufacture for profitability analysis, valuation of their inventory and to control cost. There are many different costing systems that firms can use according to the functioning of their company. Costing systems are designed to gather and report complete data in regards to revenue, cost, and product profitability (Accounting Tools, 2014). Managers can use this data to set goals and make certain plans and adjustments to maintain their company. This assignment will allow me to review two different costing systems: job order costing systems and process costing systems. I will define both of these systems and review each system in detail to determine which is best suited for EEC's production of our new 1.5 GB memory chip for the computer.
Job Order Costing Systems.
Companies utilize the job order costing system generally produce unique or one of a kind products that have either been a part of a specialty order or they provide customized services. This particular system is most appropriate for event management or planning companies or companies that create specialty furniture. This particular cost system traces the costs that are relative to direct labor, materials and the overhead that is associated to a particular job order (Job Order Costing System, 2011). Job orders are defined as a customer order for a specified quantity of a particular product or service. Job Order Costing Systems measure the cost of each completed product and provides a report on the costs of all of the activities on a job order. Job order cost system aids in assigning costs to each job in a job order, which is particularly beneficial in tracking the costs associated with the production of each product.