You seemed to develop significant interest with your talk on the future of cost accounting. Your boss has heard about the excellent presentation and you are hopeful that your early retirement will take place.
A call for help has come in and with new hope you rise to answer the bell. Harmony Organs has found that their profits have shrunk. They manufacture and install pipe organs world-wide. They have many parts that are custom made for each instrument. In addition, a major part of the expenses are for packing, shipping and installation.
Norma Faye Raye, the daughter of the CFO, Linda Kaye Raye was in your presentation and came downstairs after the online club meeting excited about activity-based costing (ABC). Linda Kaye thinks that this could be a key change to get costs under control.
You are requested to elaborate on the value that job costing would bring to the company. The top managers have always wanted to see the profitability of each contract for the jobs they take. Discuss the advantages and benefits of job costing. Explain how job costing works. Include how job costing handles direct and indirect costs?
Introduce the company to activity-based costing. Explain how activity-based costing is different from job costing. Give examples of each costing approach and how they can be applied to different industries.