BUSI 601 DB 2 REPLY 2
BUSI 601 DB 2 REPLY
According to Blocher, Stout, Juras and Cokins (2016), costing involves gathering,
classifying and assigning such factors as direct materials, labor and overhead costs incurred by a
factory to the cost of the objects produced or the services produced. Procedural costs are used in
certain service industries like law firms for costing purposes. There exist two main categories of
cost accumulation namely: job costing and process costing. The decision on which costing
method to use depends on the nature of the industry, the products and services offered by the
firm, strategy sued by the firm and information needs by the management (Blocher et al., 2016,
p.97).
Job costing is defined as a system that involves the accumulation of individual customer
need and contract. Job costing is deemed to be fit for firms that produce products in large batches
or offer specific services and products to customers (Cost Management Toolbox, 2000, p.154).
Job costing is unique as it takes into consideration that every job differs in cost and therefore
assigns specific costs to specific jobs.
Process costing involves mass production in which identical products and services are
produced. Process costing is deemed to be more common than job costing as it does involve
many processes (Skinner, 1978). Companies apply process costing to produce products and
services at the lowest costs leading to the realization of more profits. An example of process
costing, include Pepsi Company which produces similar beverages in large batches and sues
basically the same process in the production process. Process costing uses an assumption that all
the products and services produced require the same amount of raw materials and labor (Blocher,
2016, p.154).
