Question

Assume your company manufactures custom furniture, handicraft, and other decorative display items. What type of cost accounting system do you recommend that your company use? What documents would you recommend as part of this accounting system?

Subjecct: Managerial Accounting

Write more than 300 words.

Answer 1

A custom furniture, handicraft, and other decorative display item manufacturer should use Job costing system. Reason being they need cost of material, labour and overhead for each seperate job. It is specific accounting methodology used to track the expense of creating a customised product.

Documents required under the Job costing system -

• Job cost sheet - it contains the details about the job order, customer number, cost infomrmation.
• Requisition form - It is form for asking material from the store. It is important document to allocate the material cost to specific job.
• Time punching sheet - It captures the time spend on the job. It helps to deteremine the labour cost to be allocated to the job.