Real World Focus
Founded in 1970, Parlex Corporation is a world leader in the design and manufac-ture of flexible interconnect products. Utilizing proprietary and patented technologies, Parlex produces custom flexible interconnects including flexible circuits, polymer thick film, laminated cables, and value-added assemblies for sophisticated electronics used in automotive, telecom-munications, computer, diversified electronics, and aerospace applications. In addition to man-ufacturing sites in Methuen, Massachusetts; Salem, New Hampshire; Cranston, Rhode Island; San Jose, California; Shanghai, China; Isle of Wight, UK; and Empalme, Mexico, Parlex has lo-gistic support centers and strategic alliances throughout North America, Asia, and Europe. The following information was provided in the company's annual report.
PARLEX COMPANY Notes to the Financial Statements
The Company's products are manufactured on a job order basis to customers' specifications. Customers submit requests for quotations on each job, and the Company prepares bids based on its own cost estimates. The Company attempts to reflect the impact of changing costs when establishing prices. However, during the past several years, the market conditions for flexible circuits and the resulting price sensitivity haven't always allowed this to transpire. Although still not satisfactory, the Company was able to reduce the cost of products sold as a percentage of sales to 85% this year versus 87% that was experienced in the two immedi-ately preceding years. Management continues to focus on improving operational efficiency and further reducing costs.
Instructions (a) Parlex management discusses the job order cost system employed by their company.
What are several advantages of using the job order approach to costing?
(b) Contrast the products produced in a job order environment, like Parlex, to those produced when process cost systems are used.