Costing Systems

Costing Systems

 

 

 

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Costing Systems

The company to be developed will be called Royale Ware interior designs. Its selling point is the provision of the middle and upper class society with the finest house interior products such as customized kitchens, washrooms for the best in-house experiences. The company targets the affluent in society with sufficient disposable incomes. Such kitchens are made to the customer specifications. The company survives by the furnishing of kitchens and interior designing of clients houses for agreed fees. Managerial and financial accountings have the same elements but are different in their own respects. Managerial accounting is used by management to get the exact costs that are associated with production (Stenzel & Stenzel, 2003)

Different methods arise as to the calculation of costs in production, however, each production process is different, thus the need for different methods of cost calculation. The costing techniques are job order costing, where a specific job derives specific costs and activity-based costing. Moreover, there is full costing whereby all costs are included in the determination of the total costs, absorption costing whereby all costs of production are factored in the calculation of the total production costs and marginal costing whereby only the variable costs are factored in the calculation of production cost of the products (Lawrence, 1982)

The following costs are to be considered in the determination of the selling price of the products and the final estimated profits for the company. Job order costing would be highly appropriate for this kind of business, which is conducted on contractual terms. Job order costing would enable the firm to attribute its costs to specific jobs as the company has multiple clients paying for similar jobs. The other costing systems would not reflect the accurate costs whereby some techniques would absorb all the costs even those associated with other jobs, thus the need for a method that truly reflects on the costs accrued to each specific task. For example,

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