Accounting · blog · business · Job Costing · Process Costing

Job Costing and Process Costing

Job costing and process costing are very similar in what they do. Both systems record the costs involved in the making of products. however a specific job like making a chair in a furniture store would compile a list of cost using job costing. All the costs involved making the chair including all screws paint and materials used to make the chair will be listed in the job costing. Process costing provides detailed information for management and helps determine if the product is financially successful or not. The process costing system is used for larger jobs and account items over the entire time it took to fulfill the job. For example, the process of making gasoline will take a longer period of time and requires materials to be used during the entire time for the large amount. Materials needed to make the gasoline will be compiled on the process costing list.

Disadvantages for job costing is that the detailed information provided for job costing records are down to the details for the specific job. This record keeping is very time consuming. Process costing is simplified and less time consuming compared to job costing. The process costing is more suited for keeping track of departments or groups rather than detailed information on single products.

Competitive pricing will always be a concern. In my view and understanding, the customer is the most important part of a business. A happy customer will return and be a repeat customer. If a product is overpriced the business may lose the customer, so pricing the product close to what the market suggest the product should be priced is imperative. Comparable prices with some sort of extra value can help the business thrive with a unique way to present the product.

Steven Bragg. (2013, March 31). Accounting Tools. In What is the difference between job costing and process costing? Retrieved from http://www.accountingtools.com/questions-and-answers/what-is-the-difference-between-job-costing-and-process-costi.html

David Ingram. (2014). Demand Media, Chron. In Advantages and Disadvantages Job Order Costing & Process Costing. Retrieved from http://smallbusiness.chron.com/advantages-disadvantages-job-order-costing-process-costing-3082.html

Laurel Delaney. (2014). About Money. In How to Price Your Product Competitively For Import and Export Markets. Retrieved from http://importexport.about.com/od/DevelopingSalesAndDistribution/a/How-To-Price-Your-Product-Competitively-In-The-Overseas-Market.htm

blog · business · Coffee · Love

Business and Coffee

Starbucks is a global coffee company; their corporation is based in Seattle Washington. The coffee Starbucks uses is definitely a variable cost along with the milk and syrup used in the cup prepared. The paper cup and heat sleeve are all variable costs for Starbucks. The prices of coffee beans vary depending on the time of year and quality of beans purchased. Milk can vary accordingly and variable costs depend on the amount milk syrups used in each cup of coffee.

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The fixed costs of Starbucks will depend on the store location and the rent provided. Rent and equipment leases are a fixed cost. The rent may be different from one store to another, but once the rent and leases are establish the amount owed each month will be the same. The fixed cost fit help management analyze the overall costs.

Starbucks has several mixed costs in the corporation. Some costs can be salaries and wages which fluxgates depending on bonuses. However the wages and salaries are typically fixed, they fall in the mixed category when there are possible changes like the bonuses. Food sold at Starbucks can fall under mixed costs as well. The costs of goods change depending on demand and time of year.

The barista making and serving the coffee at Starbucks can represent step costs. If one barista serves 40 cups of coffee in one day the costs of the employee stays the same, but if more than 40 cups of coffee are needed to be made, then Starbucks will need to pay for another barista and showing more cost for the store. On a graph the step costs will look like steps on a stair case. More costs to produce more products.

Latte Love

Starbucks would be more likely to benefit from using a customer cost hierarchy for determining cost drivers. In customer hierarchy, each unit sold could be different depending on the coffee drink being made. However, for example if milk costs .0234 per ounce and a drink needs nine ounces, the cost for the milk would be $0.21. The coffee used at around $7.50 for a pound of beans worth thirty two double shots, the coffee costs for a single drink would cost $0.23. Let’s say the coffee ordered is caramel flavored and needs one and a half of syrup at $0.277 cents for the drink. The total food cost for the drink would be $0.72, but the drink must be poured into a cup with a lid and a sleeve to protect from being burnt at a cost up to an additional $0.20 cents bring the total costs of goods per cup of coffee at $0.92 cents. Each day an order level of each customer would be one coffee per day and a Starbucks store seeing 200 customers on average a day and costing the store $183.52 in goods. An average cup of coffee costs $3.50 which brings in $700 a day minus the costs of goods brings the total to $516.48. Say the barista is paid $15 an hour and serves 25 cups of coffee per hour. That would be an additional $0.60 cents per cup of coffee for a total of $1.52 per cup and $1.98 of profit.

 

Peter Mitchell. (2014). Chron. Small Business. In Examples of Mixed Costs in a Service Business. Retrieved from http://smallbusiness.chron.com/examples-mixed-costs-service-business-37030.html

Lie Dharma Putra. (2010, May 26). Accounting Financial. Cost Accounting/Management Accounting. In Cost Drivers and its Hierarchies. Retrieved from http://accounting-financial-tax.com/2010/05/cost-drivers-and-its-hierarchies/

Biotechnology · business · Investing

Investing in Biotechnology

Investing in the biotech industry will take an aggressive investor at heart with the patience that will last a long time. The biotech industry takes about 10-15 years of development and research to complete, compared to the Pharmaceutical industry which is typically half the time to the end result. An investor in the biotech industry will have a blind period of testing as the company uses research and development. There seems to be high risk involved for the investment of biotechnology. As an investor it is hard to compare profit ratios like net profit margin, return on equity, and return on assets. The main reason these ratio will not help an investor make a decision is because the biotech company will not see the profits until they are successful with the end product. If the end product is deemed successful, the company can see profits of two and three times. However, if the company’s end product is not successful, the company can lose just as much as it can gain. Typically the biotech industry will use ratio’s such as price-to-sales ratio which is the value of each dollar of a company’s sales and revenues. Ultimately I would consider investing in the biotech industry to develop a chemical-based compound to reduce the effects or onset of Alzheimer’s Disease because if successful, the investment could prove very lucrative. I will also be seen as someone looking to better the world.

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Kristina Zucchi, CFA. (2014). Investopedia. In Pharmaceutical Vs. Biotech Investing: Is It Worth The Risk? Retrieved from http://www.investopedia.com/terms/p/price-to-salesratio.asp

Timothy Noah. (2014). Slate. In The Make Believe BillionHow drug companies exaggerate research costs to justify absurd profits. Retrieved from http://www.slate.com/articles/business/the_customer/2011/03/the_makebelieve_billion.html

Peter Gwynne and Gary Heebner. (2014, February 7). Science. Drug Products. In Pharmaceutical and biopharmaceutical firms need to reduce the cost and lead time of recently developed technologies makes that goal possible. Retrieved from http://www.sciencemag.org/site/products/ddbt_0207_Final.xhtml

Reference for Business. (2014). Encyclopedia for Business. In Financial Ratios. Retrieved from http://www.referenceforbusiness.com/management/Ex-Gov/Financial-Ratios.html

Balance Sheet · blog · business · Income Statement · Income Statement VS Balance Sheet

Income Statement VS Balance Sheet

Income statements are a must for accountants and business owners. It is a major financial statement showing profit and loss on the business and/or organization as a whole. An income statement will show the profitability of an organization during the specific time allotted on the income statement. Typically the income statement will show a quarterly or monthly statement. However, the income statement can also show two weeks of time to show a net income or net loss. The income statement allows the accountant and business owner to plan for the organizations near and far future. Typically an income statement will consist of revenues and gains along with the organizations expenses and losses.

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A balance sheet is an important tool for the accountant and business owner to see a snap shot of the business on a given day. The balance sheet shows the ending balances of the organization and reveals the organizations assets, liabilities, and equity accounts during the date stated on the report. This report uses the following equation:  Total Assets = Total Liabilities + Stockholder Equity. The importance of a balance sheet reveals the liquidity of the organization which show the ability to pay debts on a timely matter.

start-a-company-sucess

Marketing managers find the income statement more useful than the balance sheet because the income statement reveals the profitability of the business. Marketing managers want to present the best of an organization by using the information on the income statement. A marketing manager’s job is to lure consumers to purchase product or services. Marketing managers develop price strategies to maximize an organizations profits without upsetting the consumers. The income statement gives the marketing manager the important product pricing information to better help the consumers buying decisions for an on going process. A balance sheet does not reveal the overall product profitability since it reveals only a one day snap shot. In one day a popular product can be seen as unpopular, so the marketing manger would find the income statement more useful than the balance sheet.

Accounting Coach. (2014). Accounting Topics. In Income Statement Explaination. Retrieved from http://www.accountingcoach.com/income-statement/explanation

Accounting Tools (2014). Financial Statement Topics. In The Balance Sheet. Retrieved from http://www.accountingtools.com/balance-sheet

Kimberly Castro. (2014). US News and World Report. In Best Business Jobs: Marketing Manager. Retrieved from http://money.usnews.com/careers/best-jobs/marketing-manager

Boundless. (2014, July 3). Financial Statements Overview. In Uses of the Income Statement. Retrieved from https://www.boundless.com/accounting/textbooks/boundless-accounting-textbook/financial-statements-overview-3/the-income-statement-24/uses-of-the-income-statement-154-7372/