17-1SE-e - 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?

e. A landscape contractor

Step-by-Step Solution

Answer

Landscape contractors were most likely to use a job-order costing system.

Contractors

Contractor means the person or the company who works for other people on a contract basis. They are not involved in the activity which produces a large number of products for the general public. They provide customer-specific services.

A landscape contractor

A landscape contractor provides the customer-specific job. Hence, they use the job order costing system to compute the cost of the contract.