Q.18-1SE - Horngren'S Financial And Managerial Accounting

Question

Question: Identify each costing system characteristic as job order costing or process costing.

a. One Work-in-Process Inventory account

b. Production cost reports

c. Cost accumulated by process

d. Job cost sheets

e. Manufactures homogenous products through a series of uniform steps

f. Multiple Work-in-Process Inventory accounts

g. Costs transferred at end of period

h. Manufactures batches of unique products or provides specialized services

Step-by-Step Solution

Answer

Answer

S.No.	Particulars	Costing System
a	One Work-in-process account	Job order costing system
b	Production cost report	Process costing system
c	Cost accumulated by process	Process costing system
d	Job cost sheet	Job order costing system
e	Manufactures homogenous products through a series of uniform steps	Process costing system
f	Multiple work-in-process inventory accounts	Process costing system
g	Cost transferred at end of period	Process costing system
h	Manufactures batches of unique products or provides specialized services	Job order costing system

Step 1: Classification of costing system when there is one WIP account

When there is one WIP account, company use job order costing system. It is so because job order costing system has only one WIP inventory account. On the other hand, process costing has WIP account for each process.

Step 2: Classification of costing system when company prepare production cost report

The company preparing the production report uses the process costing system. It is so because the production cost report is prepared in process costing system. While in job order costing system, job cost record is prepared.

Step 3: Classification of costing system when company accumulates the cost by process.

Process costing system is used when the company accumulates the cost by process. It is so because process costing involve series of process in manufacturing of products.

Step 4: Classification of costing system when company prepares the job cost sheet

The company preparing the job cost sheets use the job order costing system. It is so because the job cost records for each job is prepared in the job order costing system. While in process costing system, production cost report is prepared.

Step 5: Classification of costing system when company manufacture the homogeneous products through a series of uniform steps .

Process costing system is used when the company is engaged in manufacturing the homogeneous (similar) products by following a series of uniform steps or processes.

Step 6: Classification of costing system when there is multiple WIP inventory account

Process costing system is used when the company is maintaining multiple WIP inventory account for each process or department, it is so because it means the manufacturing of product is conducted through a series of multiple process. 

Step 7: Classification of costing system when company transfer the cost at end of period

Process costing system is used in the companies, in which the cost is transferred at the end of the accounting period. While in job order costing system, cost is transferred when each job is completed.

Step 8: Classification of costing system when company manufactures the batch of unique products or provides specialized services

Job order costing system is used. It is so because the companies that are engaged in manufacturing the unique products, products on batches or providing the specialized services uses the job order costing system.