Early Termination of a Public Private Partnership
Public private partnership is a widely used model when it comes to infrastructure financing. However, it needs to be understood that not all public private partnerships end successfully. In some cases, the partnership ends in a default. This means that either one of the parties’ viz. the private party or the public party are unable […]
Impact of the Fall of Silicon Valley Bank
The Silicon Valley Bank collapse has the potential to be a turning point in the way the modern financial system functions. It is being touted as an event that is likely to have large-scale repercussions on the entire financial system. It is alleged that the Silicon Valley Bank is definitely going to have an impact […]
Factors Affecting Selection of Sponsorship of Sports Event
In the previous few articles, we have already studied the pros and cons of sponsorship. However, we have come to the conclusion that the pros of sponsorship far outweigh the cons. This is the reason that corporate entities across the world are spending large sums of money in order to be associated with large sporting […]
Tax Co-operation: A Primer
The modern world is globalized. This means that free movement of goods, services, people as well as capital is allowed across the globe. This has important implications for governments. A globalized system means that tax systems can no longer work in a vacuum. The tax systems are continuously interacting with other tax systems, whether the […]
How Salary Caps Work in Sports Leagues?
It is common knowledge that sports leagues all over the world rake in billions of dollars when it comes to annual revenue. It is also known that all these leagues have a well-developed fan base. Famous leagues such as the English Premier League, the NBA, etc have various sports franchises which are very competitive. They […]
Job order costing is the only way that companies can appraise the jobs that they are about to take up. In the absence of a job order costing system, companies will not have enough data to ascertain whether or not the job will be profitable.
Job order costing system enables a company to make reliable estimates about the monetary values of materials, labor and overheads that will be spent while performing a job. A more efficient job order costing system enables companies to make quotes that are low enough to be competitive and high enough to be profitable.
Over a period of time, a job order costing system becomes a valuable database. This is because there are thousands of jobs that get stored in the system. These jobs can be used by companies as empirical data. This data can be used in multiple ways. One way is related to quotations as listed in the point above. Another use is when companies can conduct in depth analysis into their own efficiency. A job order costing system provides the data that is required to conduct the analysis by product or by function and aids significantly in decision making.
Companies can use the job order costing system to find the jobs that they are competitive at and the ones that they are not. This system helps conduct in depth analysis such as cost of materials and even the cost of scrap and rework that has been done in the specific job. This cost information helps the company financially. But it also helps the company to streamline its operations.
From the costs of scrap and rework, the causes of scrap and rework can be narrowed down and even eliminated. While implementing measures like six sigma and lean manufacturing many companies use the data collected as a result of job order costing.
Job order costing also helps the company identify use its fixed assets appropriately. Since the cost of machinery is allocated amongst different jobs, accurate identification of the cost incurred for those jobs is possible. In the absence of job order costing, it would be impossible to identify the manufacturing overheads associated with particular jobs as well as allocate these costs amongst different jobs.
In conclusion, the benefits mentioned above can only be realized if the system is implemented correctly. Job order costing system can be fairly difficult to maintain, but there are tremendous financial incentives for companies to do so.
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