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Company Overview:

The company I am selecting is the company that I am currently employed at$,$ Natural Grocers. They are a specialty retailer that focuses on natural and organic groceries, body care, and dietary supplement products. Who pride themselves on providing high$-$quality products at affordable prices, exceptional customer service, nutrition education, and community outreach. I believe we are a merchandising organization, as we $$business that purchases finished products and resell them to consumers.$($Paff$,2021)$

Costing Methods:

Job order costing and Process Costing are two methods used to allocate costs in manufacturing and service industries. $$Job order costing is an accounting system that traces the individual costs directly to a final job or service, instead of to the production department. It is used when goods are made to order or when individual costs are easy to trace to individual jobs if the additional information provides value.$($Paff$,2021)$ versus $$process costing is used when the manufacturing process is continuous, so it is difficult to establish how much of each material is used and exactly how much time is invested in each unit of the finished product. Therefore, in process costing, costs are accounted for by the production process or production department instead of by the product or by the job.$($Paff$,2021)$ If one method is chosen over the other it can affect the outcome for the cost of the products because if you choose the job order costing you could have more $$jobs$$ that would increase the breakdown of the cost per product whereas there could be a shorter production process that would decrease the price of the product, so determining the method is very important and is a vital business decision.

Factory Overhead:

Indirect or overhead costs are expenses that a company incurs that do not directly tie to the production of the goods or services that the business is selling. Some need to things that Natural Grocers may incur would be rent, utilities, depreciation, insurance, office supplies, maintenance and repairs, marketing and advertising, professional fees, and some IT support services. If Natural Grocers decided to use an activity$-$bast costing $($ABC$)$ method some of the activity bases or cost drivers that will impact the product costs would be the number of labor hours used, square footage utilized by different departments, the transaction processing time, or even the number of deliveries that are needed to keep products in stock.

Recommendation:

The costing method that I would recommend to Natural Grocers would be the ABC method because of the diverse product range that is offered, the cost accuracy this method provides, this method provided a better understanding of the true cost allowing for better decision$-$making, and better resource allocation due to the ABC methods help in identifying inefficiencies. Overall, the ABC method would help increase profitability due to the benefits that are associated with this method.

CITATIONS:

$-$ Paff, L$.(2021).$ Financial and managerial accounting. Affordable Course Transformation, The Pennsylvania State University