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Bennett Body Company

Bennett Body Company

This case focuses on the difference between a business that produces a standard good (and uses
standard costing) and on that produces custom goods and uses job costing. Although numbers are
included in this case, they are their to help illustrate the effect of changing the system.Your options for

this case are:
�Keep the existing system
�Change to a standard costing system

�Use a hybrid form of costing that utilizes both standard and job costing features.

There are many correct answers to this case; however, all involve giving specific examples to justify

which accounting method you prefer.


Bennett Body Company

In the accounting literature, cost accumulation methods and inventory valuation
methods are often called cost accounting systems. Even so, these techniques are just elements
of a system or subsystem (Kaplan, 2011). Basing on the provided case, this paper describes
the most appropriate accounting system for Bennett Body Company. The paper highlights
that the hybrid system is the most suitable.
The most appropriate option for Bennett Body Company entails the use of a hybrid
form of costing in which both job costing and standard costing features are employed. A
hybrid costing system is particularly important when the manufacturing company handles
batches of products in lots and charges the cost of materials to those lots, similar to how it
occurs in a job costing environment, whilst increasing overhead and labour costs at the work
centre or departmental level and assigning these costs at the individual unit level, similar to
how it occurs in a process costing environment (Jinga et al., 2010).
In essence, hybrid costing system is often utilized in situations in which there is
identical processing of a baseline product, and individual modifications which are made
beyond baseline processing level. Nita (2014) pointed out that hybrid systems are employed
in cases in which more than a single method of cost accumulation is needed. In some
situations, for instance, standard costing method is utilized for direct materials whereas job
costing technique is employed for conversion costs, that is, factory overhead and direct
labour. In some other situations, job costing method may be employed for direct materials
whereas standard costing method is utilized for conversion costs (Kaplan, 2011). The
different operations or departments in the company may necessitate dissimilar methods of
cost accumulation. As such, hybrid cost accumulation techniques are at times called
operational costing methods.

Hybrid costing system is appropriate for Bennett Body Company since the company
manufactures custom truck bodies and some customers would at times re-order the exact
duplicate of a truck body that was ordered previously, although some modifications cause
changes in design and therefore in cost. Hybrid costing system is also relevant for Bennett
Body Company since the company manufactures identical products, that is truck bodies, until
they get to a particular stage in which some modifications are made in order to make the
truck body custom. Basically, manufacturing each of the truck bodies requires the same
processing, although different amounts of material. The company can utilize a job costing
system in assigning differing quantities of materials to each truck body, whilst employing the
standard costing method in allocating the cost of overhead and labour equally across each of
the truck bodies produced (Nita, 2014).
A hybrid of job costing and standard costing is useful in situations in which there is a
common production process which applies to several batches but where the materials content
varies from one batch to another one. Having a hybrid accounting system is better than
having either a strict job costing system or a strict standard costing system. A standard
costing system is essentially a predetermined estimate of what it should cost or is anticipated
to cost to produce a single unit of a given product (Kaplan, 2011). With the hybrid system,
standard costing and job costing would be employed. With standard costing, every production
cost would be applied or charged to the inventory with the use of predetermined or standard
prices, and quantities. The differences between the actual costs and applied costs would be
charged to variance accounts. The variances basically offer the foundation for the notion of
accounting control. With job costing, the costs would be accumulated by lots, contracts,
orders or jobs. The main thing is that the work would be carried out in accordance with the
requirements of the client. Therefore, every job may be inclined to be different (Sandretto,

It is worth mentioning that the main issue in selecting to utilize a hybrid accounting
system is whether some elements of the manufacturing process are more easily accounted for
under a dissimilar system than the system which is utilized by the majority of the production
operation (Jinga et al., 2010). A lot of business organizations are actually not aware that they
are utilizing a hybrid costing system – in essence, they have just adapted their cost accounting
systems to their business model’s operational requirements. When employing a hybrid cost
accounting system, a consideration is the added cost of employing 2 dissimilar cost tracking
systems instead of just one cost tracking concept for all operations. Nita (2014) reported that
a hybrid system should only be utilized if the resultant information is very different from
what would have been obtained from making use of a single costing system.


In conclusion, Bennett Body Company should employ a hybrid of job costing system
and standard costing system. Therefore, the accounting system will have features of both job
costing system and standard costing system. Hybrid costing system is relevant for Bennett
Body Company given that the firm manufactures identical products – truck bodies – until
they get to a particular stage in which some changes are made so as to make the truck body
custom-made to the customer.



Jinga, G., Dumitru, M., Dumitrana, M., & Vulpoi, M. (2010). Accounting systems for cost
management used in the Romanian economic entities. Accounting & Management
Information Systems / Contabilitate Si Informatica De Gestiune, 9(2), 242-267.

Kaplan, R. S. (2011). Accounting Lag: The Obsolescence of Cost Accounting Systems.

California Management Review, 28(2), 174-199.

Nita, C. G. (2014). Management accounting and control systems. Management Intercultural,

16(2), 257-262.

Sandretto, M. J. (2012). What kind of cost system do you need?. Harvard Business Review,

63(1), 110-118.

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