Bennett Body Company
Essay by PamelaD17 • January 31, 2018 • Case Study • 788 Words (4 Pages) • 2,052 Views
Bennett Body Company
Pamela Duggan
Finance and Accounting for Decision-Making BU 610
Dr. Armando Salas-Amaro
January 31, 2018
Abstract
Case study 19.1 Bennett Body Company is a custom manufacturer of truck bodies. Ralph Kern is the company’s controller. The company uses a job-based cost in system, which simply means they add the cost of labor and materials into their products. Mr. Kern received a memorandum from Paul Bennett, regarding an article on Conley Corporation’s cost accounting system. The article states that the Conley Corporation manufactured 12 models of standard truck bodies. At this point Mr. Kern is contemplating changing from a job-based cost system to a standard costing system. This case study further discusses the differences between the two costing systems including cost variations, record keeping, and setting cost standards.
After reviewing the case it gives distinction between a standard cost system with a job-cost system, which then brings up several different points regarding cost accounting. Which includes the cost for pricing, labor involved in cost accounting, the purpose for which the cost accounting data will be used, overhead rates, and the issues that will arise from controlling costs under two types of systems.
At this point Mr. Kern should summarize both costing systems to see what it will look like for Bennett Body Company. Which should look like the follow:
Conley Corporation | Bennett Body Company |
Standard Costing System | Job-Costing System |
Uses Variable Costing | Absorption Costing |
Has 12 Standard Models | Has Unique Products |
Less labor due to compiles labor, overhead, and material into fees. | Higher labor due to has to account for every unit of cost. |
If you examine the options, this way Bennett Body Company should stay with using the job-costing system. Even though the paperwork (labor) costs are higher it will keep them from paying higher overhead due to the difference in material costs and labor. Also, is will help with the having fluctuations on demand as the economy goes up and down.
In looking at the Conley Corporation’s costs they are not instantly linked to individual models which will make is almost impossible to compare standard and actual costs for labor and material used. Even though this information can be obtained it would be doubtful to provide the significance in cost control.
Bennett Body Company would lose their uniqueness of catering to the special needs of clients, if they choose to change to the standard costing system that Conley Corporation uses. If Bennett Body changes to be like the Conley Corporation who can identify 12 models of standard design, they could lose their established reputation for being unique.
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