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Handwrite in text plz not in pic since its hard to read from and plz dont copy answers that were answered before least 2-3 paragraphs

1. Compare and contrast a job order costing system and a process costing system. Give examples of situations in which it would be appropriate to use each system as well as explain why?

2. Describe and explain what is CVP analysis. Provide examples of how managers may use this tool for sensitivity analysis

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Answer #1

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Job order costing is a system of cost accounting wherein the related costs and production requirements are different from each product or each customer. However the costs incurred on labor and material are easily identifiable against the product or against the customer.

Example, Firm of advocates use job order costing as the time, efforts and monies utilized differs from each case to another. However, the associated costs of labor and material are traceable against every job order.

Process costing is a system of cost accounting wherein the production follows a systematic process to manufacture identical products and the labor, material and overheads cannot be easily identified against a specific unit.

Example, Production of cookies use process costing and related costs cannot to assigned easily to a single cookie. Instead they are charged against the total units produced in the production.

2. Analysing the changes in profits when there are changes in costs or the volume is called CVP Analysis.

Managers can use sensitivity analysis to check how the CVP model will change to the changes in the variables. ie measuring the sensitivity impact of change in variables over that of the contribution.

Example, if predicted sales was 1000 units, selling pirce is $ 10 and variable costs is $ 6. Thus contribution would be 4000. Suppose the management feels sales may fall by 20, the contribution would be 800*(10-6) = 2400.

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