An interactive exercise which encourages students to explore alternative designs for a job cost system. After studying the current cost system of a company students will simulate alternative approaches and monitor the effects on costs and profits. The material is based around four exercises:
- cost behavior and the classification of costs - job cost systems - tracing of additional costs - alternative allocation bases
Through a series of questions (with feedback) students are encouraged to explore tracing different costs and allocation bases to make comparisons.
This simulation encourages students to explore alternative designs for the job costing system of a marketing research company. The original methods for tracing direct costs and allocating overhead costs to individual jobs appear to distort job profitability and sales representative commissions. Students must consider how the accounting system might be improved while taking into account the costs and benefits of a more complex job costing system.