Pet Smart

Definition

Pet Smart is a fictional retail company specializing in pet products and services. In a managerial accounting context, it can be used to illustrate job order costing and process costing systems in practice.

5 Must Know Facts For Your Next Test

1. Job order costing at Pet Smart involves tracking costs for each specific customer order, such as custom pet grooming services.
2. Process costing at Pet Smart applies to continuous processes like mass-producing pet food or toys, where costs are averaged over units produced.
3. Direct materials for a job might include specific dog shampoos and grooming tools for a single grooming session.
4. Manufacturing overhead in both costing systems includes indirect costs like utilities for the store or salaries of store managers.
5. Accurate cost allocation at Pet Smart ensures correct pricing strategies for diverse products and services.

Review Questions

• How does Pet Smart use job order costing for its custom grooming services?
• What type of products would require a process costing system at Pet Smart?
• Why is it important to allocate manufacturing overhead accurately in both job order and process costing?

Related terms

Job Order Costing:

A costing system that assigns costs to specific customer orders or jobs.

Process Costing:

A costing method used when similar goods are produced continuously.

Direct Materials:

Raw materials that can be directly traced to the finished product.