Concept explainers
Identify which costing system—job order or process cost—the following companies would primarily use: (a) Quaker Oats, (b) Jif Peanut Butter, (c) Gulf Craft (luxury yachts), and (d) Warner Bros. Motion Pictures.
Identify the costing system that the given companies would use.
Answer to Problem 1Q
Identify the costing system that the given companies would use.
- a. Costing system used by Q Company would be process costing.
- b. Costing system used by J Company would be process costing.
- c. Costing system used by G Company would be job costing.
- d. Costing system used by W Company would be job costing.
Explanation of Solution
Job Costing: It involves products, which are unique or distinguished from other products. Because of the uniqueness of the product, the production cost is regarded for a specific product. It is used for short production runs.
Process Costing: It involves products, which are not unique or standardized products; it involves the products, which have long production runs.
Identify the costing system that the given companies would use.
- a. Q Company is producing standardized product, which is also produced by many other competitors. Therefore, process costing will be used.
- b. J Company is producing standardized product, which is also produced by many other competitors, therefore process costing will be used.
- c. G Company is producing unique product, which is not produced by any other company, therefore job costing will be used.
- d. W Company is producing unique product, which is not produced by any other company, therefore job costing will be used.
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