Job order costing is a system for assigning and accumulating manufacturing costs of individual units of output. It is commonly used in businesses where the goods produced are considerably different from each other and the cost difference is sufficiently significant. Due to the cost variation, it makes more sense in tracking the costs and revenues by separate job cost records, rather than assigning, say, an average cost per unit. Businesses that create unique products to fill customer orders require job order costing system.
On the other hand, process costing is used when homogenous goods are mass produced. In this system the manufacturing costs are collected and assigned to each unit by department, instead of assigning to each job. Usually, development of a product involves multiple processes. So the manufacturing costs are assigned to each equivalent unit at the end of each process. Paper, petroleum, chemical, textile and food processing industries commonly use process costing system.
One of the publicly traded manufacturing companies I researched on is The Coca-Cola Company , manufacturer and retailer of nonalcoholic beverage concentrates and syrups. The company’s stock is listed on the NYSE and is part of DJIA, the S&P 500 index, the Russell 1000 Index, and the Russell 1000 Growth Stock Index. This American multinational corporation is best known for its flagship product Coca-Cola. The company uses three stages of production to make their products – Coca Cola bottles.
The first stage is “Mixing and blending”, where direct materials or ingredients are mixed to make the liquid for the beverage. The next stage is “Bottling” that involves filling the sanitized bottles with the liquid, and the last stage takes care of inspecting, labelling and packaging the filled bottles. As the products produced are identical and mass produced across the three primary departments in batches, the Coca Cola Company uses a consistent process. The costs are accumulated by the department by maintaining a separate work-in-process (WIP) account. All these characteristics clearly reflect that the company uses a process costing system.
A cost accounting system aids in determining a company’s total production, by the provision of processes which helps in analyzing and reporting companies’ costs in relation to the product production. The main objective of this system is to work towards improving companies’ production. This system when applied in the manufacturing process is explained through means of approaches such as process costing and job-order costing. In the process costing approach, the nature of production follows a continuous process, also all costs are calculated at the end of a particular process. While in the job order approach the nature of production is through a work-in-progress and the costs are calculated at the end of the given process (“Order & Costing’’, 2015). These approaches enable the company to be more efficient and allows it to budget for all the activities during the manufacturing process.
Today, manufacturing companies such as the Boeing Co have adopted the use of these approaches to facilitating companies’ production. Boeing Co is the largest aerospace in the U.S which manufactures airspace products. The use of a cost-order in Boeing Co is more efficient than process costing, this is so because, the process of manufacturing involves the assembling of different parts of airspace objects which are used in the production of a particular system such as advanced information, weapons, and defense. During the manufacturing process, it entails a series of continuous processes by different skilled personnel, working under stipulated time. This approach, therefore, allows the company to budget for all the materials, time and labor that will enhance the success of the production of airspace systems (“Order & Costing’’, 2015).
Job-order costing enables business expansion by increasing productivity. The adoption of this approach enables managers to effectively calculate the profits expected during the completion of the manufacturing process. Also, the managers can keep track of the different personnel involved during the process, this is due to enhance efficiency and productivity of the process. The application of job-order costing is therefore essential and should be implemented by various manufacturing companies globally.
Many businesses have adopted cloud computing in their operations in the past few years. Cloud computing or on-demand computing as it is sometimes called refers to a system of using computer services over the internet. There are many reasons beyond business adopting clod computing.
Below are the few major reasons why companies are adopting cloud computing (John Summer):
Reduced costs: Cloud computing certainly reduces maintenance costs. Setting up and maintaining a physical server involves more money and human force. Cloud computing can reduce the equipment cost and human force. While using cloud services organizations can choose an option to only pay for the servers during business hours and shut them down during off business hours. In this way organizations can save more money.
Flexibility: Cloud services offers employees the flexibility to work from any location. Employees can complete their tasks at home or from the office premises. You can reduce the number of workstations in your office and allow some employees to work from home to save costs further
Data security: A breach of security at your premises can lead compromised data security if laptops or computers are stolen. If you have data on the cloud, you can delete any confidential information remotely or move it to a different account. Breaching the security measures on clouding platforms is difficult. Hence, you are assured of data security
In my opinion, many organizations are moving to cloud platform because of reduced costs and security concerns. Maintaining physical servers are very expensive due to the equipment cost and employees salary. Cloud services are offering flexibility to use the servers whenever the client needs them. This flexibility saves more money and it reduces maintenance costs. The second major reason is security. Number of cyber attacking are incasing these days. These attacks are may be due to poor maintenance of servers. This doesn’t mean that cloud servers cannot be hacked. There are some instances where cloud servers are hacked. When we compare with physical servers cloud servers cannot be hacked very easily. Employees can connect to the office servers from anywhere they want that’s one more advantage of cloud services.
Most business now a day have migrated at least one of their services to cloud already. It is because they are mostly reliable, highly available and scalable generally. Only few people would be able to access the services when an application is run on a physical machine or server in their building compared to the ones through cloud computing that can be accessed by lot of people through internet. That is one of the reasons why most people opt for cloud computing as it allows business owns to focus on important things. Businesses have options to choose between public, private or hybrid cloud depending on factors like price, technical expertise, business application and other business requirements.
Some of the benefits include reducing operational costs and also increasing effectiveness at the same time. Faster application implementation reducing infrastructure overhead. If client wants to expand their business geographically, cloud migration is an easy way to access. Storage needs are covered through cloud access. Cloud disaster recovery system are implemented quickly and also gives better control on resources than regular process in data center which could cost a lot. Patch upgrades database backups and periodic maintenance are done effectively and automatically through cloud. Contracts are maintained well as it does not need business to commit to a long-term contract. Being agile can promote businesses to make decisions quicker and ensuring customer satisfaction.
Any system is not fully safe so is the cloud which has some drawbacks like you might lose transparency and control while debugging performance issues. Might have some downtime issues. Sensitive data stored might not be secured, you would not have access on whom it is shared with. In some cases, data might be lost or irrecoverable, so extra care needs to be taken while migrating data from existing system to cloud. Businesses usually benefit from agility, pay per use billing concepts from cloud providers, but however with the infrastructure services it should be assessed in a risk-based evaluation.
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