Why is it important for companies to know what their cost is? What is your definition (not from the book) of process v.s. job order costing? Give a company example of each.
ANSWER:
(A)
The most important reason why a company should know its cost is COST CONTROL so that it can identify and avoid unnecessary costs thereby lowering costs and increasing profits without being having to decreasing quality of the products/services
(B)
job order costing is used when there are jobs orders that are completely different from each other. Each job order from each customer is unique and therefore requires separate cost accounting treatment.
example: air craft manufacturing companies. company: Air India
Whereas
Process costing is used when there is mass production of identical units going through two or more processes before becoming finished product.
example: chemical industries. Company: Chevron Corporation (petroleum products)
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