Can I get an answered not previously used? 1. Why do most companies use normal o

Question

Can I get an answered not previously used?

1. Why do most companies use normal or standard costing? After all, actual costing gives the actual cost, so the firm could just wait until it knows what the cost will be.

2. The management of a liquid cleaning product company is trying to decide whether to install a job or process costing system. The manufacturing vice president has stated that job costing gives the best control because it is possible to assign costs to specific lots of goods. The controller, however, has stated that job costing requires too much record keeping. Would a process costing system meet the manufacturing vice president’s control objectives? Explain.

Explanation / Answer

Answer 1)

In manufacturing Co. management always make project report and after approval of board the project work assigned to concerned manufactruing unit. so it is obvious that they already estimated the unit price by allocating all expected expenses whcih is going to incurred duing manufacturing process. Estimated(Budgeted) price ware calculated as per past experiance, knowladge of current marker rates, and expected inflation. Its also decided at project planning stage what shoud be the selling price of the product. Hence standard costing gives company a planned cost upon which he can quote the product to the estimated buyer before the product actullay manufactured. Any variance arises during actual production with respect to standard cost was promptly checked and necessary action taken accordingly. By using standard cosing management easily take strategic decisions regardign cost, wastage, profit, adn selling price which help them to easily cope with the different market opportunities and threat. Hence standard cosing gives a strategical advantage than actual costing.

Thats why most of company use normal or standard costing rather than actual costing.

Answer 2)

Process costing accumulates the cost of process for a defenite period of a process. That cost will be distributed to output equally as the output is identical. Hence it gives less details record kepping in comparision to job costing where records of each unit produced is provided by each job saperatelly. Hence the control objective of manufacturing vice president is best suited in job costing where it can be assigned to a specific lots. preocess cosing didnot provide that specific control.  

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