Today’s global economy is fiercely competitive. To a large extent. competitive means .cost-efficient: If you cannot produce quality products efficiently. you may lose O\1t to the Japanese. the Germans.

the Koreans. or a company down the street. Up to this point. we have discussed job order. process. and activity-based costing methods. lob order costing has two advantages: (I) it measures the costs of products produced in “batches,” and (2) unit costs are determined as soon as the job is complete.

Process costing, however, has the advantage of providing detailed information about the cost of performing each step in the manufacturing process. In an ABC keep our illustration short. we assumed that maintenance and utilities costs were Master File’s (lilly man- ‘ manufacturing overhead costs.

Consequently. overhead costs are relatively low in comparison 111 the cost of di.. rect materials and direct labor. In many companies. overhead represents a much larger component cation of manufacturing overhead is based on the specific activities that drive overhead costs. The  ABC should provide a more useful measure of each product’s cost.

To provide their managers with more types of useful information,. many companies today have “hybrid” cost systems, designed to realize the advantages of Job order. process. and activity-based costing companies become increasingly liked. and more accurate cost accounting methods. Bill 1(1 employ the basic concepts introduced.

Posted on November 23, 2015 in Accounting Systems for Measuring Costs

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