Grand Canyon University Job order costing systems

Supplemental Resource

Review the video below and summarize how it either add some new to the discussion or re-enforces what you read. Share with your classmates also.

Understanding the Role of Management Accounting

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Beena Shaji replied to David Duren

Feb 10, 2024, 6:44 AM(edited)

Hello Sir,

Based on the analysis of cost allocation and its value in decision-making, the video reinforces that management accounting mainly exists to help internal stakeholders make informed decisions about operations. Internal decision-makers need information on the capacity available, the costs incurred in different areas of operations, and other internal aspects of operations. Management accounting techniques provide a means of getting this information, depending on the nature of an organization’s operations. Job order techniques are, for example, best applied in firms that handle orders with non-uniform requirements and, therefore, need special consideration of their requirements.

Based on the video, management accounting analyzes internal costs and allocates them to products more accurately than other accounting methods. Using management accounting techniques, direct and indirect costs can be assigned to products more accurately, which provides a means of evaluating the product’s profitability and its impact on operations (Bell, 2013). The cost allocation analysis shows that certain costs relate to the entire organization and are difficult to allocate to individual product units. Costs such as utilities, for example, cannot be effectively allocated to units of a product manufactured at a given time. Management accounting techniques provide a means of doing so accurately by identifying an ideal allocation base that best captures each allocated cost.

The video also analyses how management accounting techniques, such as job order costing, can aid businesses in creating forecasts that can be used to control their manufacturing or service operations. To manage costs, firms need to know exactly how many units of a product they can make and the associated costs in different areas of their operations. Management accounting techniques make this possible by effectively allocating costs to products, making it possible to create detailed forecasts for future operations.

References

Bell, T. (2013). Job Order Costing. Management Accounting. YouTube.  https://youtu.be/HJMFaygeGP0

REPLY

DD

David Duren replied toBeena ShajiFeb 10, 2024, 1:35 PMUnreadHi Beena, thanks for your comments. you indicated that job order costing can help create forecasts useful in determining how many products to produce.  How is this so?  Can you explain your thoughts a little more?