Company Costing Methods for Apple, Inc.
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Overview
Companies choose their costing method based on their business activities and processes, as well as the products and services they offer. A company can be a manufacturing, merchandising, or service organization; this also impacts which costing method will be most useful for its purposes. As a part of costing, the company also needs to decide how to classify overhead costs using either traditional or activity-based costing (ABC).
In this written assignment, you will choose a company, consider its business and costing requirements, and recommend a costing system that will work best for the business.
Prompt
Think about a company you know. This could be a current or past employer or a company you admire. Consider its business activities and the type of products and services offered. Based on what you have learned so far, write a short paper that reflects on the different costing methods and speculates on how they might apply to your selected company.
Specifically, you must address the following rubric criteria:
Company Overview: Identify the company you selected and provide a brief overview of its business.
Is it a manufacturing, merchandising, or service organization?
Costing Methods: Compare the job order and process costing methods, and explain how each of these can be applied to the company. How could the costs differ if one method is chosen over the other?
Factory Overhead: Outline possible indirect or overhead costs the company may need to account for, and identify the type of costing the company might use for these costs. If the company decides to use activity-based costing (ABC), what are some activity bases (cost drivers) it might use to allocate these costs?
Recommendation: Based on your analysis, recommend a costing method for the company, and explain why you think this method will work best for the business.
Company Costing Methods: Apple Inc.
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Company Costing Methods: Apple Inc.
Apple Inc. is an innovative technology company that has emerged for the past three decades. The company produces computers, including Mac books, produces iTunes, iPods, iPads, and the most recent iPhones. Apple Inc. was founded by two college dropouts Steve Jobs and Steve Wozniak, on the first of April 1976, with a vision of changing people’s perception of computers (Kunnathur, 2017). The business is globally famous, but its headquarters are in Cupertino, California, while offering business via its operating segments in China, the US, Japan, Asia, and others. The company is recognized as one of the most socially influential and most profitable manufacturers of software and hardware products used in businesses, homes, schools, and entertainment places (Heracleous & Papachroni, 2016). Most of the company’s products are preferred by consumers due to their quality, performance, and design. Apple Inc. also offers several software products, such as iCloud, IOS, and others, designed to meet user productivity and convenience. The company’s products and services are sold globally via online stores, retail shops, third-party network carriers, and direct sales. The company has a wide range of giant competitors from computers, software, and phones. Moreover, the company has computer competitors such as Lenovo, Dell, Acer, and others; they have Samsung and Sony for the iPhones. For the software applications, competitors include Google and PayPal (Heracleous & Papachroni, 2016). The company uses different costing methods for the products and services they manufacture for their customers.
Costing methods refer to the techniques or methods used to allocate costs or prices for the various products manufactured by an organization. Costing methods are vital in any business operation. Still, before one sets the price of a given product, they need to consider a business’ various components, such as overhead expenses, labor, raw materials, and others (Eydman, 2017. The most common costing methods include job order and process costing methods. The job order costing method is used to allocate prices that are different from each other, and this method works best for automobile companies and manufacturers such as Apple Inc. Since Apple Inc. has various products that differ sufficiently, the job order method can apply to the company as it helps trace the price of each product and service offered, thus making it easy to define and understand actual costs (Eydman, 2017). The other costing method is the process costing method, which determines prices based on the labor and materials used to manufacture the products. Since it is hard to measure the amount of labor and materials used to produce a given product or even identify the individual price of the variety of products produced, the method allows the company to trace the overall costs of the products. Once the overall costs are identified, it becomes easy to allocate the price of each item manufactured. Therefore, for a company like Apple Inc. that produces various products, it would be best to determine the overall cost of all the products and their prices (Eydman, 2017). Ultimately, the costs from the two methods would differ. The job order costing works best when a product or service results are from a particular customer order or completely different. The process costing method works best for ...