The Costing System: Red Lobster And Kroger

The costing system is a system that is used throughout businesses that offer a service. “A standard costing system uses standard costs and quantities of all three types of manufacturing costs: direct materials, direct labor, and factory overhead” (Blocher 2016 p. 97). Companies utilize the costing system to monitor the actual product usage compared to prior usage. Contractor use this system when bidding on jobs; once they collect specific instruction for the requested job they factor in the amount of material, labor, and other overhead costs then provide a quote for the assignment. “Strategic cost management is deliberate decision-making aimed at aligning the firm's cost structure” (Anderson & Sedatole 2003). Red Lobster and Kroger are examples

of companies that use the costing system. They maintain control by focusing on overhead costs such as labor and inventory, and waste products.
The processing system is used by companies that keep a large amount of stock. “Many organizations have performance indicator on yields, occupancy rates, capacity utilization, labor efficiency, customer service levels, and defects” (Oliver 2004). Another form of a processing system is how a manager manages the actual vs. projective use of products. “Accountants and prospective accountants who study cost accounting systems in the literature are told that all systems are either job costing or process costing” (Skinner 1978 p. 165). Some of these commodities can be labor, electrical, and water if a company doesn’t stay focused on these items they can have the ability to go above the company budget.
It’s important for a company to manage all aspects of the business. The report that is commonly used to track the expenditures is known as the Profit and Loss report (P & L).
Sam’s and Costco wholesale are companies that use the processing system. “Management must understand how each product contributes to profitability to make strategic choices” (Chapter 9 (2000) p. 150). The processing system allows them the ability offer bulk quantity to their customer at a reduced rate. Their inventory varies from products such as small household appliances, large household products, food products, travel plans and services for the vehicle.