Introduction. Muddled Is An Acfi2003 Student And As Many
1398 WordsApr 24, 20176 Pages
Muddled is an ACFI2003 student and as many others has problems with several aspects of the course including a fundamental principle, the differences in the costing systems and cost management systems. The purpose of this essay is help Muddled understand the fundamental costing principle that management systems should reflect the fact that different costs are relevant for different purposes, and how this principle affects the way that job costing and process costing systems are designed. Along the way several costing concepts will be explained and laid out for Muddled to understand in a more simplified method. The axiom will be covered first with particular reference to the costing systems, the differences between the job…show more content…
2.2 Job Costing System vs. Process Costing System
The main differences between a job costing system and a process costing system can be summarised to the cost objects used, the size of the job and production, identification of the product, whether work in progress is present at the start of the period, the method of cost accumulation used and when cost are asserted.
2.2.1 Cost Objects
Muddled needs to understand that cost objects is something that is assigned costs and has a direct link to those costs.
Job costing systems are used by firms who make special orders or customised products with individual identities for each job with regards to singular contract specifications. The cost object being the individual unit/s or product in that contract. This is due to each job using different amounts of resources and is allocated specifically to the individual job, thus the specific job is the cost object that has the costs directly assigned to, at the completion of the job.
Process costing systems are applied when there is a mass production of similar products, in a continuous flow; though one or multiple departments; thus the products having no identity. The process or department used to make these products are assigned the costs at the end of a cost period rather