Recommendation for SAC

Recommendation for SAC

Introduction

Sparklin Automotive Company (SAC) began its operations in 1930 in the US market. The company introduced its product lines in terms of linking itself with the automotive manufacturing companies through the supplies of spark plugs in the industry. Moreover, with the passage of time the company introduced new products and technologies and in similar regards the company launched a new process of manufacturing it spark plug in the US automotive industry. The new process provided the company to give a new extended life with higher quality to its spark plugs guarantying 100,000 miles. In addition to the induction of the new process of manufacturing the spark plugs it has given a new dimensional phenomenon to the company in terms of success. Moreover, the new implementation has given a prospect to the company of shifting its gears on the accounting perspective. Currently SAC is implying process costing and is considering implementing job order costing for its newly invented spark plugs.

Discussion

In today's world, organizations use various types of costing techniques due to the importance it carries for the business management in order to provide the company with decision making process (Greer, 2004). The costing techniques are more useful in regards to accommodate the company with keeping tracks of its accounts in terms of cost that is implemented in regards to production. The usefulness of the accounting techniques in respect to Sparkling Automotive Company is that the paper will provide a differentiation between the two accounting methods which include comparison between process costing and job order costing. This will help providing a reason to why SAC should use job order costing rather than process costing.

The paper will differentiate the two costing methods and will provide SAC with the most suitable method for the company to operate with its new spark plugs. Moreover, the final result would provide the company with opting for either the new method which is the job order costing or to continue with the existing method of process costing. In this regards, it would be necessary to conduct an analysis of both the accounting methods to suit the condition for Sparklin Automotive Company.

Analysis of Process Costing

This technique of costing is implemented in identifying those costs that are identical or homogenous and in other cases the technique helps in identifying cost for those products which are uniform. The next thing that the process helps in is that it dignifies an average cost method which is reflected in per unit cost for the total period in which the production has occurred. The cost in this method is tracked under the belt of the account for the work in progress and the system is valued where there is a ongoing manufacturing process that underlies identical products (Sievanen, 2002).

Currently SAC is using the method of process costing for it spark plug and it is important to analyze the technique in order to recommend the future of using such method in this company. The process cost accounting is used by SAC due ...