M2: Assignment 1 - Cost Accumulation System
A subsidiary of Atlanta-based Cox Enterprises, Manheim was established in 1945 as a wholesale vehicle auction operation. With more than 20,000 employees in 106 operating locations, Manheim is the world's largest provider of vehicle remarketing services. In 2011, Manheim handled nearly 8 million used vehicles, facilitating transactions representing more than $50 billion in value (http://www.manheim.com/about).
According to (Garrison, Noreen, Brewer, 2011, p. 108) job-order costing is a versatile and widely used costing method that may be encountered in virtually any organization that provides diverse products or services. With respect to that, Manheim provides a service that offers its customers a reliable and secure marketplace in which to purchase or sell a variety of vehicles and services (http://www.manheim.com/about). Each vehicle or service transaction is considered a job, thus classifying Manheim as a company that utilizes the job-order cost accumulation system.
In order to illustrate how this system applies to Manheim’s costs of operating, you would first have to understand how the company generates revenue. Manheim’s former Vice President of Development, Ralph Liniado once stated, “We are in the business of auctioning, reconditioning and processing used vehicles. We get a fee for putting them through the auction and for certain administrative functions; we get a fee for actually selling the car; and we get a fee for reconditioning the car at various levels. That’s where our revenue streams come from” (McKeown, P. & Watson, R. (2008). Manheim Online). The overhead costs associated with the above mentioned revenue is allocated from the following: auctioneer wages, administrative staff wages, labor, materials, advertising, utilities, and insurance. As the company continues to grow technologically, their overhead costs will significantly decrease however, their base model for generating revenue...
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