You have learned about various types of costs, imagine what costs might be associated with this company and classify them. You should be able to define and list some product costs and some period costs. Define the elements of manufacturing costs and then list some particular costs that you think would be included in manufacturing costs (be specific about what type of manufacturing costs they would be) in a winery. Identify which of these costs would be direct and indirect and why. You have learned about job costing. Please explain how job costing would apply to a winery and why it would be an appropriate way to handle costs. What might be an appropriate allocation base and why? Imagine that you are working in the winery utilizing your own major (examples: marketing, operations management, HR, Finance, accounting). If you are an accounting major, how you as an accountant use the information you have described above to help the organization as a whole? For all others, please describe what position you would hold in this company and how you would use the information produced by the accounting office in your job at the company.
A) Different types of costs in a company
Direct Cost: Costs whixh can be identified with and allocated directly to cost units.
Indirect cost: costs which cannot be identified with and allocated but can only be apportioned to cost unit.
Fixed cost: costs which do not change with the number of goods produced by the company.
Variable Cost: costs which fluctuates with the number of goods reduced by a company.
Operating Cost: Costs which is associated with everyday transaction of business.
Product cost: costs that are associated with the output and the used to value the inventory.
Period cost : Costa written off as expense in the period in which is incurred.
Sunk cost: cost incurred in the past and has no effect in the future decision making.
Opportunity cost: the value of a benefit sacrificed in favour of an alternative course of action
Out of stock cost : cost incurred due to stock shortage
Shutdown stock : cost which will incurre even after shutting down the plant
Historical cost : cost which are ascertained after incurred
Marginal cost : additional cost incurred for the production of an additional unit.
Research cost : cost of searching for new improved product.
Normal cost : cost which is normally incurred at a given level of output
Abnormal cost : cost which is not normally incurred a given level of output
Avoidable cost : cost which can be avoided as a particular product or department with which they are related is discontinued
Unavoidable cost : cost which cannot be awarded with the discontinuation of a product or department
Explicit cost : cost involving immediate payment of cash
Implicit cost : cost which do not involving immediate payment of cash
B) Product Cost and Period Cost
Product Costs
Cost of raw materials
Wages on labour
Production overheads
rent on factory etc.
Period Costs
Selling expenses
Advertising expenses
Travelling expenses
Transportation expenses
Commissions
Deppreciation expenses etcetc
C) i) Elements in Manufacturing Costs
direct materials
direct labours
overheads
ii) Elements of manufacturing costs in a winery
Director Materials : fruits for making wine
Direct labours: wages for labours working in the winery
Overhead: i) fixed overhead : factory rent, Electricity, depreciation on wine machines etc.
ii) variable overhead : lighting, repairs and maintanance of machinery etc.
D) Job Costing to winery.
Job costing is a costing technique design to help to track the cost of individual projects or jobs. Under job costing, cost is assigned for each job or work order. It would be easy for a winery to maintain job costing the help to identify each job for cost accumulation is the product is manufactured as per customer specification.
E) Approprate base of Allocation
The three most common allocation bases are direct labor hours, direct labor costs, and machine hours.
F) As a cost accountant of the winery, I would use the above information to determine the expenditures inorder to ascertine the production cost of the winery for the particular period of time. It also help to track the cost and the movement of the wine inventor it throughout the wine naking process.
Some costs are difficult to assign through this method of cost accounting. Indirect costs, such as management and office staff salaries are sometimes difficult to assign to a particular product produced. For this reason, this method has found its niche in the manufacturing sector. Research the Internet and discuss Activity Based Costing. Explain what it is and how it differs from Job costing. Explain why “true” product costs have only a minor importance in final market price determination. Define and give an example of a “cost object”, “activity” and “resources.”...
You learned about job order costing and activity-based costing. Each method deals with manufacturing overhead in a different way. There are various implications with how costing is done. The following items will help stretch your thinking a bit. Why should an employee have some understanding of costing if they are not in the accounting department? Explain how the method of costing used will impact the company with: (A) the quoting of customer jobs and (B) gross margin/profit on the Income...
What are the major differences between job-order costing and process costing systems? Give an example of a well-known company that might use job-order costing and an example of a well-known company that might use process costing. Explain why you have chosen the companies that you did, specifically why job order costing or process costing are used. *** You are also required to name a company that uses both costing methods, including providing an explanation of your choice. A great place...
1. Choose the answer that is not a distinguishing characteristic of financial accounting information. It is global information that reflects the performance of the whole company. It is used primarily by internal users to facilitate decision making within the company. It is more concerned with financial data than physical or economic data. It is more highly regulated than managerial accounting information. 2. What types of businesses can use a job costing system? A. Manufacturing and merchandising businesses B....
1. 1. How would you define ethics? What are three factors that might affect good ethical conduct? Conduct research and provide an explanation of why the Sarbanes-Oxley Act was created and how it relates to ethics. What are the legal liabilities of an accountant? 2.In Chapter 1 and 2 you have been learning about the accounting equation, debits/credits, and account normal balances. The accounting equation is foundation of accounting. Understanding debits/credits and the account normal balances are just as important....
Assignment Details This assignment has 3 parts: What are some of the groups that need accounting information? What kind of accounting information do they need? Why? Think of a company you’ve done business with as a consumer. How might managers in this company use accounting information to made decisions? What might happen to the company if it did not have access to timely and accurate accounting information?
Assignment Details This assignment has 3 parts: What are some of the groups that need accounting information? What kind of accounting information do they need? Why? Think of a company you’ve done business with as a consumer. How might managers in this company use accounting information to made decisions? What might happen to the company if it did not have access to timely and accurate accounting information?
Define the accounting function of a business. Why is accounting such an important function in business? How might a company use accounting to understand its own financial strengths and weaknesses? Define the Finance function of a business. Why is Finance an important function in business? How might a company use finance to decide whether or not to undertake future projects? What is the difference between short-term financing and long-term financing? Assume that members of Bill family form a corporation called...
Select one of the following types of businesses: Custom home builder Auto repair shop Accounting firm Lawn service company Television show production Describe how your chosen business might use Job Order Costing to account for its product(s) or service(s): What direct and indirect product costs would the company incur? Are these costs variable or fixed? What overhead allocation base would you suggest for the company to use? What typical period costs would you expect your chosen type of business to...
What are the major differences between job-order costing and process costing systems? Give an example of a well-known company that might use job-order costing and an example of a well-known company that might use process costing. Explain why you have chosen the companies that you did, specifically why job order costing or process costing are used. Do not choose companies that your classmates have already commented upon. Participate in follow-up discussion by critiquing your classmates' choices of companies.