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Cement is one of major industries of Pakistan. Pakistan is rich in cement raw material. Currently many cement plants are operating in private sector. Pakistan Cement Industry has huge potential for export of cement to neighboring countries like India, U.A.E, Afghanistan, Iraq and Russian States. There has been a robust growth of cement demand seen both in domestic and exports market during the financial year ended June 30, 2007. The industry achieved an overall growth of 32% with domestic demand of cement increased by 24.95% whereas the exports increased by 111.86%.

 

Which costing system is employed by this industry; job order costing or process costing?

Give any two reasons to support your decision.

 

Note:

  • Your answer should not exceed 10 words
  • Detailed reasons are not required, be concise
  • Give your answer in the following format

 

Costing system: ___________________

Reason:

  1. __________________________
  2. __________________________

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Replies to This Discussion

Please Discuss here about this GDB.Thanks


i also need solution sombody share the idea solution..,

Refrences frome book to consult

Thesre are showing that this is the Process Costing system

Don’t copy just take idea dear J

 

PAGE#124

On the other hand take the example of a company producing cement. All of the bags of cementproduced are quite similar. Here separate calculation of cost of cement supplied to each customer is neither desirable nor feasible. The company can calculate cost per bag of cementproduced by dividing total cost incurred during the accounting period by total number of bagsproduced during the period.

Accordingly, the company can fix the price per bag and bill each customer according to the

number of bags supplied to him. This company will use process costing system.

 

Page 131:

Examples of industries using Process Costing include:

Bottling, Pharmaceuticals, Cement, Paint, Coal, Distilleries Electricity, Ice, Soap, Sugar, Canning,Chemicals, Cooking oil, Electric appliances, Flour, Natural gas, Petroleum Products, Rubber, Steel,

Textile. Under process costing, for the purpose of cost control, each department involved in

manufacturing process is regarded as a cost centre and product costs are accumulated separatelyfor each department.Cost Centre means a division or segment for which an individual is made responsible

.for the incurrence of costDepartmental costs are passed through department work in process accounts and not through asingle work in process control account as in job costing. As all units are produced from the sameraw materials and by same manufacturing operations, therefore, it is assumed that same cost ischargeable to each unit. Instead of accumulating cost of individual units, an average unit cost iscomputed by dividing total cost by total output of the period. Cost is associated only with departments and not with jobs.

See the attached file for MGT402 idea solution
Attachments:
Refrences frome book to consult

Thesre are showing that this is the Process Costing system

Don’t copy just take idea dear J



PAGE#124

On the other hand take the example of a company producing cement. All of the bags of cementproduced are quite similar. Here separate calculation of cost of cement supplied to each customer is neither desirable nor feasible. The company can calculate cost per bag of cementproduced by dividing total cost incurred during the accounting period by total number of bagsproduced during the period.

Accordingly, the company can fix the price per bag and bill each customer according to the

number of bags supplied to him. This company will use process costing system.



Page 131:

Examples of industries using Process Costing include:

Bottling, Pharmaceuticals, Cement, Paint, Coal, Distilleries Electricity, Ice, Soap, Sugar, Canning,Chemicals, Cooking oil, Electric appliances, Flour, Natural gas, Petroleum Products, Rubber, Steel,

Textile. Under process costing, for the purpose of cost control, each department involved in

manufacturing process is regarded as a cost centre and product costs are accumulated separatelyfor each department. Cost Centre means a division or segment for which an individual is made responsible

.for the incurrence of costDepartmental costs are passed through department work in process accounts and not through asingle work in process control account as in job costing. As all units are produced from the sameraw materials and by same manufacturing operations, therefore, it is assumed that same cost ischargeable to each unit. Instead of accumulating cost of individual units, an average unit cost iscomputed by dividing total cost by total output of the period. Cost is associated only with departments and not with jobs.
Costing System: Process Costing

Reason1: determines the specific cost for each task to create a product

Reason2: accounting system that gathers direct/indirect costs of manufacturing and then averages them out into a cost per unit

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