What is the difference between accounting for costs under a JIT system and under a traditional process costing system?

Process costing.

  • A cost of production report is used to collect summarized and compute total and unit cost.
  • Production is accumulated and reported by department.
  • Costs are posted to departmental work in process account.
  • Production is a process at the end of period is restated in terms of complete unit.
  • Total cost charged to a department is divided by total computed production of the department in order to determine a unit cost for a specific period.

J . I . T.

  • The saving that can result from a minimum inventory investment & associated carrying cost has led to increasing attention to J. I T. Inventory system. Such a procedure calls for heightened coordination with suppliers so that materials arrive immediately prior to then use.
  • J. I. T. authorization for a part to be made at a work station is generated by a requirement for a part at the next work station in the production lines. As parts are used in final assembly the need for production of their replacement is authorized. The process is repeated at all proceeding work stations thus “pulling” parts through the production system as they are needed and eventually pulling row materials & purchased parts from suppliers.
  • J. I. T pertains to row materials inventory as well as to work in procen inventory between interacting work cents.
  • J. I. T. places a new emphasis on the desirability of minimum inventory levels and improving integrated manufacturing process rather than focusing on individual materials or operations use of other materials planning and control tools such as EOQ and safety stock calculation.

1 Comment on "What is the difference between accounting for costs under a JIT system and under a traditional process costing system?"

  1. There’s one field of accounting, but there are many different jobs within the field such as auditor, book keeper, payroll accountant, cost
    accountant, tax accountants, etc. Accountants wear many hats and often do different tasks for different clients.

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