CHAPTER 5 CONCLUSION AND RECOMMENDATION. To compete in this industry with its competitors, the company has to offer

Transcription

1 CHAPTER 5 CONCLUSION AND RECOMMENDATION 5.1. Conclusion CV. Jaya Abadi Fortuna is a company that works in shoe production field that is located in Bandung. The production includes men s shoes and men s sandals. To compete in this industry with its competitors, the company has to offer competitive price. Customers will prefer good quality products with reasonable price. This can be achieved if the company can determine quite accurate production costs of each order it gets. The author has done some research to analyze current costing system in the researched company and the author comes out with the following results: 1. The company until this time does not have any methods that enable the company to determine accurately the production costs of each order. The method that is used by the company in calculating the production costs is very simple and rough by using a standard of the cost of a pair of shoes. The determination of the standard is done by the manager based on past data and experience. Furthermore, the company has not classified its production costs at present. 2. The manager of the company thinks that it is not necessary to make a systematic and complete report because of two reasons. First, the financing head officer is not really expert in his work. The financing head officer simply

2 records the transactions occurring in the company without following the accounting rules. 3. Second, the activity within the company is not complex and the size of the company is small. According to the company, the accounting method that is used presently is good enough and thus, there is no reason to add additional cost and effort to hire expert accountant or implement new system. 4. The advantage of current method is that this method is simple and practical. The company does not need to classify its material costs, direct labor costs, and manufacturing overhead costs. Thus, the company can reduce clerical work and cost. However, in decision making process, this method is not very useful and even deceiving. 5. One of the weaknesses of the current system is that this system does not take into account all relevant costs in calculating the production cost, such as electricity, depreciation of machinery and building, etc. 6. The standard that is used by the company to determine the production cost has several weaknesses. It is very difficult determine the appropriate standard. Some of the costs are really complicated to be measured. Additionally, the price of leather is often fluctuated in considerable amount. All of these contribute to the irrelevancy of the standard. Therefore, the standard needs to be upgraded gradually. Thus, to determine the standard, the manager needs a lot of consideration such as accuracy, completeness, time and cost needed.

3 7. The documentation is done manually, instead of using computer. The financing Head Officer simply records the transaction incur in the company in the available forms. Looking at the nature if the business and the results of the analysis, the author draw a conclusion that job order costing method is appropriate to be applied in CV. Jaya Abadi Fortuna. The company produces the products based on the order received. Hence, each order is unique and not connected each other. By using job order costing method, the company will be able to measure the productivity of each order. Furthermore, it will be easier for the company to monitor the costs and performance to fulfill each order. In implementing job order costing system, we found several limitations. There is no clear record of the company s assets (supplies). This condition makes it difficult to calculate the depreciation costs. The absence of clear record contributes to the impossibility to control the supplies. In fact, the control of these assets is very important because there are several supplies that are very easy to be misappropriated, such as hammer, nail, etc. The author has implemented job order costing system and the results shows that the total cost under current method is higher than under job costing method. This result in the company set the price of shoes too high. The difference between the results of two methods is quite large. With inappropriate selling price, it would be difficult for CV, Jaya Abadi Fortuna to compete in the market.

4 By implementing job order costing system, the company will be able to offer customers with lower price. This may lead the company to be able to compete domestically, as well as internationally Recommendation Considering all of the weaknesses of the current system, the author has several suggestions to improve the performance of the company. 1. In terms of the standard used by the company, it should be revised and updated gradually, considering the fluctuated price of raw materials. In manufacturing industry, usually raw materials are the portion costs of total production cost. The price of leather is often fluctuated and has a very significant impact to the production cost. Therefore, CV. Jaya Abadi Fortuna has to frequently monitor the price of leather to make necessary adjustment. 2. The personnel involved in determining the standard that will be used to calculate the production cost have to have enough knowledge regarding the production process, products, market and the production costs. Therefore, the manager should determine the standard together with the production, warehouse and financing head officer. 3. The company should implement job order costing system because the system is suitable with the nature of the business, which is producing the shoes based on order received.

5 4. The manager of the company has to record all supplies of the company in the future. Without the record, it is very difficult to determine the depreciation costs. Moreover, the record can also be used to monitor the assets. 5. In determining the depreciation cost, the manager should identify the costs needs to replace broken assets. This value of costs can be used to determine the depreciation cost per year. 6. In the future, it is better for the manager to clearly record all occurring costs so that the data can be used to forecast the cost for the next order. This forecast will then be the base for making a budget report. 7. The company should make a budget report. At the end of month, the company should compare the actual and budgeted production cost. By doing this, the company will be able to monitor the costs of production. 8. The manager should classify the production costs to facilitate the manager in identifying the occurring costs and determining the appropriate tariff. 9. The tariff of overhead cost that is suitable for the company is based on direct labor cots. This is based on the consideration that most of production process in producing the shoes is done manually, instead of machines. 10. The overhead costs that are calculated in this thesis are only the costs that are considered to be imperative for the determination of production costs and which are possible to be determined. However, the company can do further research to identify other relevant costs to increase the accuracy of factory overhead costs.

6 11. Job order costing method applied in this thesis can be used for further research related with cost accumulation method. 12. The company should also develop its marketing activities by promoting its competitive advantages. The company can offer customers with lower price under job order costing method. Furthermore, the increasing demand for hand made shoes in international trade and the antidumping action against China and Vietnam may contribute to the risen of national shoe industry. The implementation of job order costing method is good for the future prospects of the company because the company can determine the production cost with more accurate and systematic method and offer more appropriate and reasonable price of products. Hence, by using job order costing method, the company will be able to offer lower price to customers while maintaining the purpose of the company that is not to experience loss. Hopefully the company will be able to gain more customers and market. The manager realizes the importance of using appropriate method in accumulating the production cost. He plans to implement this method to the next order he received.

7