17-1SE-a - Horngren'S Financial And Managerial Accounting

Question

Distinguishing between job order costing and process costing

Would the following companies most likely use job order costing or process costing?

a. A manufacturer of refrigerators

 

Step-by-Step Solution

Answer

A manufacturer of the refrigerator is most likely to use process costing.

                                                                              

Manufacturing company

Manufacturing companies are the companies engaged in the production of goods with the help of machinery, labor, raw material, etc. 

Process Costing

Process costing system means the system that traces and accumulates the cost of manufacturing when a large number of identical units are being produced. A manufacturer of refrigerators uses the process costing system to determine the price of the products.