COSTING IN BUSINESSES

Costing is a technique of accounting that determines the cost of materials and expenses in a business. The main costs are the cost of labor, cost of technology and machinery and cost of operations among others. Examples of companies that use job costing are Boeing (Airplanes Company), Deloitte and Touche (an accounting firm) and Lockheed Martin (Technology System Company). Those that use the process costing are Wrigley (a chewing gum company) and Chevron Corporation (a petroleum company). Firms that use activity based costing are Hewlett Packard and IBM. Every company uses a specific technique because of the advantages that it has over the other methods. The companies that use order costing do so because it allows the management to keep track of the revenue and the profits of the business. The method helps in record keeping because it helps the employees to know what labor, material and costs were in the production process. It also aids the leaders to keep track of the employees and their teams.

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Process costing is advantageous to the firms because it helps the firm to calculate the average cost of every unit that the firm produces. It helps the management to compare the performance of different departments over time. The method ensures that there is better record keeping and eases the burden of the managers when they are assigning costs to different activities. The activity based costing is more accurate than the other methods because it gives better pricing decisions. It allows managers to see the non-value adding actions and processes in the form and they can eliminate them. In response to both process based and the job costing method that most students provided, a company like Boing should use an activity based costing method. This method also gives provision to performance records and scorecards.