Question 9.OA.1: CAE and Job-Order Costing CAE is the global leader in the sp...
CAE and Job-Order Costing
CAE is the global leader in the specialized markets of simulation, modeling technologies, and integrated training services. Its core markets are civil aviation, defense and security, and health care. Its civil aviation division and training network serves approximately 3,500 airlines, aircraft operators, and manufacturers in more than 45 facilities worldwide. CAE’s flight simulation products are recognized for their reality, quality, and reliability, and for being the closest thing to the actual flight experience. The company’s defence and security division provides defense, security, and military training for pilots, maintenance, and crew members across the world. Its Healthcare unit provides state-of-the-art simulation services used in hospitals, medical and nursing schools, military training, and emergency response units around the globe. From its corporate headquarters in Montreal, Canada, CAE builds its strength by focusing on its customers, innovation and quality. The company seeks to create organizational value through the leverage of its products and services into related and emerging markets in the aerospace and defence industries, along with civil and domestic markets, such as urban and health-care simulations. To achieve these goals, CAE must provide solutions that match customer preferences and meet the cost, quality, and performance expectations of customers whose operations are complex and ‘mission critical.’ This customer focus is one way in which CAE can maintain a competitive edge in the global marketplace. CAE also must be mindful of costs. Therefore, CAE designs, develops, and manufactures its products in terms of ‘mass customization’ and modularization. While products might share common features to permit some economies of scale, CAE customizes them to meet the specific requirements of individual clients. It also reduces costs by shortening manufacturing cycle times. Working with its customers to meet current and anticipated market demand allows CAE to remain both competitive and innovative. In the long run, this ability to meet customer preferences translates into sustained shareholder value. For example, CAE maintains its market niche by customizing simulation systems to meet the specifications of its global customers. Its diverse customer base includes the British Royal Air Force, the German Army, Singapore Airlines, Ryanair, Boeing, Airbus, the US Navy and Air Force, health-care providers, medical and nursing students, and emergency medicine responders. In terms of its costing system, CAE employs a detailed job-order system to accumulate and record costs for each specific contract. The system must also track complex contracts that span an extended time frame and life cycle from initiation to completion. Why does CAE use a job-order costing system instead of a much simpler process costing system? How does the costing system at CAE operate to support CAE’s strategy and its goals to create customer and organizational value?
