Companies need to know the amount of money spent on their products before they can set appropriate selling prices. Firms that fail to accurately determine process costs can find themselves setting too low prices that lead to losses or too high prices that scare away customers. Accurate process costing helps to set right prices or adjust the process if costs cannot allow reasonable pricing. Importance of the Study Although many researchers have contributed to this topic, little can be seen in terms of standardization of the approaches of determining process costs. This paper is a literature review aimed at determining major points of divergence that have prevented standardization of process costing methods. Four scholarly articles are analysed to determine gaps, discrepancies and common grounds in relation to process costing. The paper will make suggestions on the best way forward as well as lay ground for future research. Literature Review One of the articles reviewed is a research study done by Cooper and Slagmulder aimed at determining process costing methods used by different Japanese firms (2002). ...
use failure to give all firms equal chances of being included in the sample introduced some biasness in the study (Dillman, Eltinge, Groves & Little, 2002). The interviewers made notes while taping interviewees’ responses. The findings indicated that most Japanese firms preferred target costing as opposed to process costing. In this regard, target costing is a projection of costs of future products with the aim of determining whether the assigned expenses can allow reasonable pricing to generate profits or not. The difference between process costing and target costing is that the latter is applied on future products while the former on complete or semi-complete products (Cooper & Slagmulder, 2002). All interviewed firms indicated that they relied on target costing and only applied process costing when they find discrepancies at the end of the production process. In another study, Everaert, Germain and Werner sought to investigate process costing methods used by different companies in Belgium (2002). The researchers based their study on four companies that were selected randomly (2002). After getting approval, they issued questionnaires to process costing officers in the selected firms and collected them after two weeks (Everaert, Germain and Werner, 2002). The results indicated that three out of the four sampled companies used weighted average method of process analysis. The remaining firms used the first-in first-out (FIFO) method. The FIFO method treats costs from different periods separately and has four steps comprising of analysis of physical flow of units, calculation of equivalent units, computation of unit costs and analysis of total costs (Everaert, Germain and Werner, 2002). The company that used FIFO said the method is reliable because separate calculation ...
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The consumption based approach in this process lends interplay of the scientific approach to the process strictly on the basis of cause-and-effect relationship to the processes, rather than ’ guestimation’ (guess and estimation) in the process of allocation and apportionment, with the underlining principle of ‘traceability’.
..6 Weaknesses and strengths…………………………......7 Absorption costing in the public sector………………...8 Conclusion ……………………………………………..9 List of references……………………………………….10 Essentially absorption costing refers to the means through which all the manufacturing costs are engrossed by units produced.
The author of this research paper evaluated a number of research works pertaining to process costing and its different fields of study. As the author has a keen interest in costing of the products and their designing and manufacturing processes, the evaluation of previous literature is helpful in identifying areas of further study.
Primary Objective in Job order Costing:
When a job produces a specific quantity for inventory, job order costing permits the computation of a unit cost for inventory costing purposes. When jobs are performed on the basis of customer specifications, job order costing permits the computation of a profit or loss on each order.
The expense for a future benefit that lasts simply during the present phase is a cost that is expensed. For instance, the cost of office provisions used in the present fiscal period is classified as an expense because it does not have benefits that carry over to future fiscal periods.
sfaction .The paper also brings into account or evaluates the statement; ‘Quality is Free’ which was made by Philip B Crosby who was one the quality Gurus of the 21stcentury (Crosby 1990). The examination of Crosby’s statement and its relevance in the current climate of