SAC has developed revolutionary manufacturing techniques 1500-1750 words

SAC has developed revolutionary manufacturing techniques utilizing its new spark plug manufacturing technology to offer special-order spark plugs for the auto racing industry. The company is currently using process costing for its spark plugs but is considering using job order costing for the new specialty spark plugs. How does job order costing differ from process costing? Should SAC use process or job order costing for the specialty spark plugs? Make a recommendation for SAC. Be sure to fully back up your recommendation.

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Solution Preview processes sequentially. In this costing system, the output of one process turns into the input of the next process; and finished products being the yield of the last process (Bradford, 2008).

In the job order costing system, cost is collected for each physically identifiable job of work, as it moves through the factory regardless of the accounting period in which the work is done, whereas, process costing system collects cost for all the products worked on during an accounting period. The job costing evaluates the cost of a production unit group; while process costing assesses its units manufactured in a particular time period (Toney, 2001).

In job costing, production is generally executed against customers order and specifications while; in the process costing, production is executed for mass consumption on the continuous basis for building stock and for future sale. In job costing, costs are accumulated for a specific product without taking into account the time period, whereas, in the process costing costs are accumulated for specific processes or departments for a given time period and production is measured for specific period of time.

In job costing, one WIP (Work in Process) account is maintained, whereas in process costing, individual work individual account for WIP is prepared for each process. The great supervision and control by the management is demanded in job order costing; while, in process costing, relatively less control is demanded because WIP needs standardization. The cost unit is case of job order costing is a 'Job' on- the- job cost sheet; whereas the cost unit in case of process costing is 'Process', which is computed by department on the department production report.

Completion of job is necessary for computation of the cost of the job. Once the job is completed; all costs are added to ascertain the total cost of the job, while in process costing, completion of work is not awaited (Shim, & Henteleff, 1995).

In job order costing, skilled labor varies as per changing specification, on the other side, in process costing, unskilled workers carry out specific tasks repeatedly that forms small part of the production process. In job costing, each job may be different; while each process is the same and generally production is continuous.

Besides that in job order costing, procedure is followed from the receipt of job order upto completion of job. The procedure mainly includes job order number, production order, recording of costs and lastly completion of job; on the other hand, in the process costing, simple process accounts are prepared. The above discussion concludes that both the costing methods mainly focus on how cost of products is carried out.

//Moving to next part of instructions, that asks us to write about which one is the more suitable method of costing for the SAC company 'specialty spark plugs'. In this part, we will mainly discuss the benefits of using job or process costing, so that by using this information, SAC Company will ...