 In this discussion, we will discuss the discussion question of discuss the two primary cost systems for manufacturing companies. If we see a discussion question like this or essay question like this, we can look through and think through what a manufacturing company is. Support Accounting Instruction by clicking the link below giving you a free month membership to all of the content on our website broken out by category further broken out by course each course then organized in a logical reasonable fashion making it much more easy to find what you need than can be done on a YouTube page. We also include added resources such as Excel practice problems PDF files and more like QuickBooks backup files when applicable. So once again click the link below for a free month membership to our website and all the content on it and then think through what the cost flow systems would be and hopefully that will lead us to the two primary cost flows that we have the two primary forms that the cost flow systems will take. So when we think about a manufacturing company we're thinking about a company that manufactures inventory that's going to be different than other types of companies we can contrast that to a merchandising company for example which also has inventory but does not make the inventory so now we have the added step of course of making the inventory and so that's going to lead us to then how are we going to do that how are we going to track the costs of inventory we're not just going to be buying the inventory and then selling it we're going to have to then track the cost of the inventory in some way. Now there's two primary ways we can think about that if there's if you if you look at how we would do that we can break the types of products up into two categories in essence and we will typically be using two types of systems in order to track the inventory based on the characteristics of the inventory we are making for example if we make very customized types of items if we make custom jewelry if we make custom guitars if we we're working in construction where all the jobs are different we have different size jobs and that kind of thing then we're going to have to apply the costs to the job to specific jobs when we start a new job we're going to need to somehow apply the costs to whatever thing we're starting to work on so you can think of it like as the specific inventory we're working on we need to apply the cost to that and in essence we can think about that as basically a type of job we're putting together this type of job they're not the same as other types of jobs they're similar probably but they have unique characteristics and therefore the costs will not be the same from inventory piece to inventory piece from job to job we make two custom necklaces one could cost much different than the other and therefore we have to track the cost separately and that's going to be a job cost system the other system is that if we're making something that's really the same for making for processing oil or something like that for making any kind of processed food you can think if we're making taffies or if we're making any any type of candy or anything like that or you know processed candy will typically be all the same our goal is to have a finished product where it's all the same and therefore our goal is to really systemize that process down to be able to do it as easily as process as possible to scale the process so that everything is conforming to uniformity not differentiation and if that's the case then we don't need to track the cost to each unit or each job that wouldn't make sense because they're all the same so our goal there then is to track the costs but not necessarily by each unit because all the units are the same and we can just basically apply the same cost to whatever unit so therefore we're not gonna we're gonna tie the costs in production to when the production process is taking place to the process so that's going to be a process cost system so those are the those are the two primary systems now it could be the case that that we have types of things that have a more of a processing component or in a more of a standardized component we might have types of inventory that we make that have you know two two layers to it we make some component that's all the same and some component that is customized partially but just in essence those are going to be the two major type of manufacturing that we'll have and we'll distinguish them typically by how unique the inventory is how customized something is going to be as the driving factor as to whether we want to use a job cost system or a process cost system