Job Costing Case

Simply put, cost accounting seeks to trace all costs such as production costs, assessing cost of inputs at every stage; also considers fixed costs as depreciation of equipments. Cost accounting aims to measure, records the expenses and compare input to actual results (Bhatta, 2010). This helps companies measure their performances. For instance, the company in question could, through cost accounting, evaluating where the expenses originate.

In activity based costing, popularly known as ABC, the manufacturing overhead costs for products are assigned in a logical manner, as opposed to the traditional approach where costs are allocated based on man hours (Bhatta, 2010). In ABC, activities that actually cause the overheads are assigned first. Only the costs of activities that are significant in production are included. In order to get costs under control, the management needs to remove unnecessary overheads. Activity based accounting eliminates miscalculation of production overheads (Srinivasan, 2008). ABC is different from job costing in that it lists overheads according to individual activity, and is logical while job costing lists materials, labor and overheads for small units according to man-hours and is illogical.

The following are the benefits of cost accounting:

• Classifies income and costs according to departments, functions, products, contracts and jobs for easy evaluation; the detailed information is good for managerial accounting.

• Provides cost of producing a single unit that helps in setting favorable selling prices

• Provides information about every activity from each department; the management can therefore decide on which activities create profits or losses.

• Controls materials and supplies since they are accounted for at every level.

• Maintains