Reference no: EM13340044

For any kind of companies it is important to choose and use the right types of costing system. Costing system is an accounting system uses by companies and organizations to monitor the company's expenditures and overheads ("What is a Costing System?", 2013). Job In -order costing system and a process costing system are the two major types of costing system uses in manufacturing and organization that provide services (Nurre, n.d.).

 A job-order costing system is use in order to determine and track the cost of generating specific individual job and calculating the cost per unit (Wild & Shaw, 2012). The job-order costing system tracks the amount and the cost of material and labor for each specific job (Wild & Shaw). The job-order costing system consisted of custom orders, heterogeneous products and services, low production volume, high production flexibility, and low to medium standardization (Wild & Shaw). These data are located in detail information thru the cost flows process in journal: during production, job completion, and job delivery (Wild & Shaw). While a process costing system focus on the individual process and the cost of each process is determine by the average of the total cost (Wild & Shaw). The process costing system consisted of repetitive procedures, homogeneous products and services, high production volume, low product flexibility, and high standardization (Wild & Shaw)

Job-order costing system work best for companies that produce different products such as shipbuilding (ex. Bay Shipbuilding Company), aircraft manufacturing (ex. Boeing), hospital (ex. Florida Hospital Orlando), special order printing (ex. TC Printing), construction (ex. Granite Construction), movie studios (ex. Walt Disney Studios), and professional services (ex. law firms, accountants, appraisers, etc) (Nurre, n.d.). Process costing system work best for companies such as cement (ex. Nevada Cement Company), flour (ex. King Arthur Flour), brick (ex. Palmetto Brick Company), paper (ex. Awa Paper), bottling (ex. Coca-Cola), chemicals (ex. The Chemical Company), sugar (ex. Imperial Sugar Company), coals (ex. Peabody Energy), steels (ex. AK Steel), and oil refining (ex. Continental Refining Company) (Nurre).

For a company that plans to start with only one version of the product by at some point in the future may offer a variety of option the best costing system to use is job-order costing system. This way it is easier to keep track of the material cost and the cost to make individual unit, so for future order of the same item the company is able to predict the estimate cost of the order so the chance of being short on order or overproduce is minimize.