SYSTEMS OF COSTS

SYSTEMS OF COSTS BY PRODUCTION ORDERS SYSTEMS OF COSTS PROCESS

This system accumulates the costs for each order,batch or order that is
CONCEPT
physically identifiable as its production progresse.
1. Batch production
2. Made to order
CHARACTERISTICS 3. Individual control
4. It is not necessary to wait for the end of production to know thw unit
cost
1. Provides great accuracy in the determination of unit costs
2. provides full details of the production of each item
ADVANTAGES 3. Futere estimates can be made based on costs previous
4. You can know which orders have left profit and which losses
5. Production in process is known without the need to estimate it
1. Its cost of operations is very high because a great deal of work is
required to obtain all the data in detail.
2. It takes more time to obtain the costs
DISADVANTAGES
3.There are serious difficulties regarding the cost of partial deliveries of
finishes products since the cost is not obtained until the completion of the
order
Graphic arts companies, construction companies, locksimth contractors,
shoe manufactures, furniture manufactures, machine builders, can work
TYPES OF ORGANIZATION
on a projecct or order basis and indicate the costs acoording to that order
this system is also known as of job order cost system.
This syste is used to measure manufacturing costs during an
accounting period and the allocate them among the number
ofunits manufactures during that period.
1. Production continuous
2. It is made without there being a specific order (but it can
exist)
3.Global control
4.Avarage costs per operation
5. It is essential to refer to a period of time to determine the
unit cost
1. The costs calculated by this system, speed up setting prices
for the sale, which allows collecting important information to
make a solid budget.
2. Thanks to the fact that similar products are calculated,the
calculation of their unit costs is considerably facilitated.
3. This cost system is more affordable for industrial companies,
since it is economical, does not require a large investment of
time, and does not require great technical capacitu on the part
of the staff, wich is why it is easy to implement this cost
system, in these companies.
1. This cost system is not very flexible, which can affect the
first months of the year, which are months where companies
have changes, which can affect the cost of products, so the
standard cost of products, so the standard cost is not safe in
the face of this situation.
2. Due to the instruments and tools that are constantly used,
implementimg this cost system can be expensive at first.
3. This cost system can be better utilized by companies that
have excepcional internal control.
Process costing is used in companies that manufacture a single
producct or when the difference between the types of products
is not substantial, that is when the products are relatively
homogeneous. This cost system is commonly used in oil
compannies, chemical and pharmaceutical industries, bottlers,
and auto parts manufacturers.