Reference no: EM13678000

Perpetual Inventory System vs. Periodic Inventory System

Your friend is the controller for a small manufacturing company. The company has recently purchased the Peachtree software because of its advanced inventory capabilities. One thing he noticed when setting up the company was the system's use of a perpetual inventory system instead of the periodic inventory system. Since the system tracks the inventory count in real time, your friend is relieved as he no longer needs to do an inventory count. But he has questions you need to answer. Given below are the questions he needs clarification on. You need to provide answers to these questions:

• What are the major differences between the periodic inventory system and the perpetual inventory system?
• Why is an inventory count necessary under a periodic inventory system?
• What may happen if an inventory count is not done?
• Is it correct to think an inventory count will no longer be needed under the perpetual system? Why or why not?

The Job Costing System

Your parents have just started an advertising company, and they would like you on board to handle the billing. They have stressed to you how important it is to track the costs associated with each job so they can figure out what types of industries are more profitable than others, and then they can focus their efforts on those industries. You remember learning about job costing at school and mention it to your parents. They would like to understand more and ask you for a complete explanation of job costing.

Respond to your parents' queries making sure that you address the following areas:

• The benefits and challenges of using a job costing system.
• The kind of mistakes might be made under the job costing system.
• Job costing as the best choice for an advertising company. Provide reasons on why you agree or disagree.
• Identification of the cost of a job without using job costing.