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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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Section
BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Which type of cost system, process or job order, would be best suited for each of the following: (A) TV assembler, (B) building contractor, (C) automobile repair shop, (D) paper manufacturer, (E) custom jewelry manufacturer? Give reasons for your answers.

(a)

To determine

Cost Accounting Systems

Cost accounting systems are used to measure, record, and report product costs. Managers use products costs for setting product costs, controlling setups, and developing financial statements. There are two types of Cost accounting systems; they are:

  • Job order costs, and
  • Process costs

To Identify: The suitable cost system (Job order costs or Process costs) for TV assembler.

Answer

Process cost system is best suitable for TV assembler.

Explanation

TV assembler is suitable for the process cost system because, the products are slightly standard and lose their identities as individual items.

(b)

To determine

To Identify: The suitable cost system (Job order costs or Process costs) for building contractor.

Explanation

Building contractor is suitable for Job order cost system because; the building cost can be identified with each job without great difficulty.

(c)

To determine

To Identify: The suitable cost system (Job order costs or Process costs) for automobile repair shop.

Answer

Job order cost is best suitable for automobile repair shop.

Explanation

 Automobile repair shop is suitable for Job order cost system because; the cost can be equitably recognized with each job.

(d)

To determine

To Identify: The suitable cost system (Job order costs or Process costs) for paper manufacturer.

Answer

Process cost system is best suitable for paper manufacturer.

Explanation

Paper manufacturer is suitable for Process cost system because, manufacturing paper process endless and the products are homogeneous.

(e)

To determine

To Identify: The suitable cost system (Job order costs or Process costs) for custom jewelry manufacturer.

Answer

Process cost system is best suitable for custom jewelry.

Explanation

Custom jewelry manufacturer is suitable for job order cost system because, most of the jewelry production consists of job orders only, and the costs can be rationally recognized with each job.

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