Successful Job Costing System of a Dell Company - Essay Example

Owners of various companies, including Dell, have an intimate interest in job costing since when job costing is done accurately, it is an effective manner of determining whether jobs are profitable or making losses (Maher, Stickney & Weil, 2012). This is an integral factor as far as the success or failure of a business is concerned even though numerous companies do not recognize the true cost of their jobs until the point when it is too late. Other companies have no awareness of how to collect or assess critical information that is related to costs. To circumvent this, companies should possess job-costing reports that are well structured and provide elaborate information concerning the performance of their jobs. At the basic degree, job costing reports demonstrate the points where expenses are higher than the projections to make billing faster to adjust and the reports should be easily available while being highly detailed.

How Dell might set up a job-costing system to determine the costs of its computers
The best approach that Dell can use in the creation of a successful job costing system is to employ accounting software that can perform this specific function. The majority of software applications have dynamic job costing functionalities and with the correct systems, the next step for Dell would be the creation of appropriate job costing reports determined by the setup of the system(Horngren, Harrison & Oliver, 2009). Dell’s reports will therefore be founded on data entered into the system and this makes it important for Dell to be aware of the information that will be required and how it will be collected. From the beginning, Dell should determine exactly what its job costing requirements are and it must come up with a degree of cost detail that will be supportive. For instance, if the requirements are basic, the data that is gathered should be demonstrated since a system that has a comprehensive breakdown leads to reports that contain too much information, resulting in confusion as well as apathy towards the system. Accurate and precisely defining goals from the beginning will assist in avoiding challenges in the future.
To determine its job costing needs, Dell should develop a structure that will assist it to classify costs. In numerous systems, costs can be classified into stages, cost classes, and cost codes, and this breakdown must be meticulously customized to correctly reflect Dell’s needs. Dell should start by developing a team that will identify the needs of the company and organizes the structure and approach to be used to achieve them. This team should include among others, managers, accounts receivable, accounts payable, as well as payroll personnel since a diverse group will consider the views of numerous people to whom the data will benefit. The team constituted by Dell should meet for discussions on the items on their checklist and find ways of assisting the company to determine what it needs from a job hosting system and then identify an approach and the details that should be monitored.
Job to Dell
In Dell’s case, every functional area can be affected by changes to activity-based costing and this makes it imperative for managers to participate and buy into all the functional areas. Various people from different departments at Dell bring particular knowledge to their functions which are required to complete the set of activities in the entire company while appreciating the cost drivers of every activity. At Dell, job costing is utilized for the collection of costs associated with direct labor, overhead and direct materials whereby overhead is allocated to computers, which are considered jobs, subject to a predetermined rate of allocation like square footage and machine hours among others(Dussart, 2010). Dell had been employing engineering complexity as its guiding principle for allocation. The computers that required more time to be engineered were allocated with higher proportions in regards to overhead costs but this approach meant that the same product line got allocations for overhead that were not practical resulting in inaccurate cost information of products. Dell’s activities mirror the production flow as well as business and thus its ABC system is designed around the activities of the company.
How costs of components, assembly testing, and quality control can be allocated to each job

Dell should use a job costing system that considers every order of a computer as a job since every order is assembled from a specific set of components, creating a single cost for every component. The majority of the components are bought and this makes the cost the purchase price if some components are produced, the cost of production may be assumed to be the cost of the component. Every order requires several materials and every one of them should be included in the job cost sheets of the orders. Additionally, labor in the assembly is also incurred and thus the costs associated with direct costs can be allocated to every order based on the amount of time utilized in the assembly. If Dell’s assembly is extremely automated, there is a possibility that no labor is seen as direct, and labor is thus considered as another overhead item. Read More