Question

Costing Systems (Task #2) Azlina discussed the business plan with her accounting lecturer who agreed to serve as her part-time accountant. Her first advice was for the business to develop a budget. Since Azlina 18 yet to complete her management accounting subject, she was not aware of the various costing systems that exist in businesses. Her accounting lecturer told Azlinaof the three different types of costing systems that exist in organizations - job order, process costing and activity based costing Required: Which type of costing system is Rasa Sorga Bakery Houz most likely to use? Discuss?

Answer 1

Firstly let us know the meaning of different types of costing methods

1.Job order costing: It is a system for assigning and accumulating manufacturing costs of an individual unit of output.it is used when various items produced are sufficiently different from each other and each has a different cost..

2.Activity-based costing is a more specific way of allocating overhead costs based on activities that actually contribute to overhead costs. In job-order costing and variance analysis, overhead costs are applied based on a specific cost driver such as labor hours or machine hours. An activity is an event, task, or unit of work with a specific purpose, whether it be designing products, setting up machines, operating machines, or distributing products. Therefore, activity-based costing considers all these potential activities instead of relying on just one variable (either labor hours or machine hours).

3.Process costing an accounting methodology that traces and accumulates direct costs, and allocates indirect costs of a manufacturing process. Costs are assigned to products, usually in a large batch, which might include an entire month's production.

conclusion: it is advisable for rasa sorga bakery houz to follow process costing which is often used in manufacturing and food industriese, one method for collecting and assigning manufacturing costs to the units produced. A processing cost system is used when nearly identical units are mass produced.