Concept explainers
(Learning Objective 1) For which of the following would
- a. Electrician
- b. Manufacturer of mass-produced carbonated beverages
- c. Law firm
- d. Manufacturer of custom-ordered production equipment
To identify: For which option job costing would not be appropriate.
Answer to Problem 1QC
Option b. Job costing would not be appropriate for manufacturer of mass produced carbonated beverages.
Explanation of Solution
Job costing: It is a process which is used by the companies to identify the costs incurred in manufacturing one unit of product. Job costing is used by those companies which manufactures custom ordered product or unique products or relatively small batches of different products. Each batch or each unique product will be considered as a separate job. The cost incurred in different jobs might vary in terms of direct material used, direct labor and manufacturing overhead. Therefore, job costing is used to track the cost incurred on each job separately. This is different from the process costing. Process costing is used by the companies which mass produces identical products. Therefore, the cost incurred on each unit will be almost same. In process costing, manufacturing costs incurred are averaged so that each identical unit bears the same cost.
a. Electrician will use the job costing as he will charge each customer based on the cost of performing a particular job for that specific customer. Hence option a is incorrect.
b. Manufacturer of mass produced carbonated beverages will use process costing method instead of job costing as the manufacturer is producing large quantity of identical goods and per unit cost of manufacturing can be identified by averaging total manufacturing costs incurred. Hence option b is correct.
c. Law firm will use job costing method as they will charge each customer on the basis of cost incurred on serving the client. Hence option c is incorrect.
d. Manufacturer of custom-ordered production equipment will use job costing method to determine the cost incurred in terms of direct material, direct labor and manufacturing overhead in manufacturing that particular equipment. Hence option d is incorrect.
Want to see more full solutions like this?
Chapter 3 Solutions
EBK MANAGERIAL ACCOUNTING
- I have the following information: direct materials $250 and total manufacturing cost $700. Overhead applied to jobs at a rate of 200% of direct labor cost. This is for Chapter 2 job costing in managerial accounting. I am supposed to figure out conversion cost, direct labor cost, and manufacturing overhead. I know the formula for conversion cost= direct labor + manufacturing OH Prime cost= direct labor + direct materials How do I figure out direct labor cost with the given information? The learning objective states calcualte predetermined overhead rate, but I do not have estimated manufacturing cost and estimated labor. Can you please help? Thanks, Erica Gordonarrow_forwardHow do companies figure out past costs and the learning phenomenon that applies to them or if they will need to up the costs compared to the last product?arrow_forwardClick to watch the Tell Me More Learning Objective 2 video and then answer the questions below. 1. The first step in preparing a cost of production report is to _____. compute equivalent units of production determine the units to be assigned costs determine the cost per equivalent unit allocate costs to units transferred out and partially completed units 2. The last step in preparing a cost of production report is to _____. compute equivalent units of production determine the units to be assigned costs determine the cost per equivalent unit allocate costs to units transferred out and partially completed unitsarrow_forward
- Click to watch the Tell Me More Learning Objective 4 video and then answer the questions below. 1. Which of the following represents the computation of direct materials cost per equivalent unit? Total direct cost for the period divided by total equivalent units of direct materials. Total equivalent units of direct materials divided by total direct cost for the period. Total direct cost for the period divided by total units of direct materials. Total units of direct materials divided by total direct cost for the period. 2. What is the conversion cost per equivalent unit, when the total conversion cost for the period is $1,225 and the total units of packaged drinking water produced during the same period is 5,000 gallons (70 percent complete). $0.17 per gallon $0.35 per gallon $2.86 per gallon None of these choices are correct.arrow_forwardClick to watch the Tell Me More Learning Objective 3 video and then answer the questions below. 1. The journal entry to recognize depreciation on machinery is ________. a debit to Factory Overhead and a credit to Accumulated Depreciation a debit to Accumulated Depreciation and a credit to Factory Overhead a debit to Factory Overhead and a credit to Depreciation Expense a debit to Depreciation Expense and a credit to Factory Overhead 2. Process and job order cost systems are similar in ________ manner. recording and summarizing product costs classifying product costs as direct materials, direct labor, and factory overhead allocating factory overhead costs to products All of these choices are correct.arrow_forwardWhat type of cost accounting system would be most appropriate to be used by a graduation invitation printing company? Group of answer choices Not enough information to determine Preplacement cost system Process cost system Job order cost systemarrow_forward
- In a team of two or three students, interview the manager/owner of a local business. In this interview, ask the manager/owner the following questions: A. Does the business collect and use cost information to make decisions? B. Does it have a specialist in cost estimation who works with this cost data? If not, who is responsible for the collection of cost information? Be as specific as possible. C. What type of cost information does the business collect and how is each type of information used? D. How important does the owner/manager believe cost information is to the success of the business? Then, write a report to the instructor summarizing the results of the interview. Content of the memo must include date of the interview, the name and title of the person interviewed, name and location of the business, type of business (service, merchandising, manufacturing) and brief description of the goods/services provided by the business, and responses to questions A-D.arrow_forwarda) You have been recruited by Education-For-ALL (EFA), an NGO providing teaching and learning support for Students of Second Cycle Schools in Ghost Town, as a Cost Accounting Tutor. During a lesson on the topic “Nature and Scope of Cost Accounting”, a student raised his hand and asked you about what difference there is, if any, between cost accounting and financial accounting. Based on the scope, timing, users of accounting information, reports and standards, explain, with examples, the difference between cost accounting and financial accounting. Define the term Cost, and explain how cost of a product is ascertained when: i. a product is self-constructed or manufactured in-house. ii. a product is a finished product that has been imported. iii. a product is a finished product that has been purchased. Cost accounting as a sub accounting system provides cost information for financial accounting and managerial accounting. List two (2) each of the information cost accounting provides…arrow_forwarda. Describe the flow of costs through a product costing system. What specific accounts are involved and how are they used? b. When a single volume based cost driver is used to apply manufacturing overhead, what is the managerial accountant's primary objective in selecting the cost driver? c. Assume Kardan university has decided to replace all professors with teaching robots. How might this switch impact on the university's choice of cost driver as the basis for overhead application? Explain.arrow_forward
- 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 b. A manufacturer of specialty wakeboards c. A manufacturer of luxury yachts d. A professional services firm e. A landscape contractor f. A custom home builder g. A cell phone manufacturer h. A manufacturer of frozen pizzas i. A manufacturer of multivitamins j. A manufacturer of tennis shoesarrow_forwardAs a new graduate employee in a hospitality company, you are being introduced to the staff. The company owns several businesses. You have been informed that your initial job will require you to analyse the costing system of a restaurant (Café Deluxe) which is situated on a beach side tourist area. Your supervisor has recently attended a business conference where he was introduced with an improved costing system, Activity Based Costing. Café Deluxe presently uses traditional costing method and they want your help to explore the adoption of Activity based costing systems. In your first visit you have noticed that it is a sit-down restaurant and offers menu dining. The corporate marketing manager is considering introducing a buffet menu at Café. Required: a) Explain the types of decisions Café Deluxe faces under normal business circumstances and the associated management accounting information required by the Café management. b) Do you think the profitability of restaurant services…arrow_forwardWhat are the major differences between job-order costing and process costing systems? Give an example of a well-known company that might use job costing, and an example of a well-known company that might use process costing. Explain why you have chosen the companies that you did, and do not choose companies upon which your classmates have already commented. Participate in follow-up discussion by commenting on your classmates’ choices of companies.arrow_forward
- Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College