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Mod 3 Discussion

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Response to Discussion Mod 3

1. Job order costing is a system for assigning manufacturing costs to individual products. Job order cost systems is used when products are made based on specific customer orders. Each product produced is considered a job. Costs are tracked by each job.
2. Residential Home Construction company
2a. A Job Order Cost system can be used to help maximize profits in a residential home construction company by measuring and recording direct material cost, direct labor cost and applying these costs to specific jobs. Each home can be considered a separate “job” and as such each home is billed separately. Once job order cost system has been utilized a construction company can determine the profit of building a specific type of home. By utilizing job order cost a construction company can identify whether using a certain material or laborer can reduce the cost of building and increase the profit margin, or vice versa.
2b. Cost control forces a construction company to ensure that all decisions made during the construction of a home are based on an estimate of cost propositions of the alternatives being considered, and that no decisions are taken whose cost propositions will cause the total budget to be surpassed. This ensures that each model will be profitable for the company.
2c. A residential home construction company can maximize profits by producing houses that have similar material and designs. A construction company has the potential of purchasing bricks, stone, wood, wiring, outlets, sheetrock, carpet, tile, toilets, sinks, cabinets, windows, switches, doors, paint and other material in bulk from a manufacture in order to reduce the cost of each item. Building similar homes also reduces labor costs as skilled workers become familiar with the design of the homes. Much the same as an assembly line building cars becomes more efficient,

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