17-1TI - Horngren'S Financial And Managerial Accounting

Question

Question: Would the following companies most likely use a job order costing system or a process costing system?

1. Paint manufacturer

2. Print shop

3. Caterer

4. Soft drink bottler

5. Yacht builder

Step-by-Step Solution

Answer

Answer:

Paint manufacturer, Yacht builder and soft drink bottler companies are most likely to use the process costing system. The print shop  and caterer are most likely to use the job order costing system.

Step 1: Job order costing system

Job order costing system is a system that take place when customers order small, unique batches of goods produced by the companies. Printing shops, caterer, etc., use the job order costing system.

Step 2: Process costing system

Process costing system are used in the manufacturing industries to determine the total production cost for each unit of products. Paint manufacturer, yacht builder, soft drink bottler, etc., use the process costing system.