Chapter 4, Problem 1MC

Which of the following product situations is better suited to job order costing than to process costing?

A. Each product batch is exactly the same as the prior batch.

B. The costs are easily traced to a specific product.

C. Costs are accumulated by department.

D. The value of work in process is based on assigning standard costs.

To determine

Concept introduction:

Job order costing:

Job order costing is applied to the businesses which manufactured the product or provide the services according to the client’s order. As its names suggest, Job order costing is costing done for a particular job.

Process Costing System:

As its name suggests, process costing system is the branch of cost accounting which is applied where production of a product takes more than one processes to complete for example the production of shoes from leather goes through cutting, stitching and policing processes.

To choose:

The situation better suited to job order costing than to process costing

Answer to Problem 1MC

B. The Costs are easily traced to a specific product

Explanation of Solution

Explanation for correct answer:

Job order costing is better for the situation when the Costs are easily traced to a specific product. Hence the correct option is B.

Explanation for incorrect answers:

A. Job order costing is not better for the situation when each product batch is same. Hence this option is incorrect.

C. Job order costing is not better for the situation when costs are accumulated by a department. Hence this option is incorrect.

D. Job order costing is better for the situation when the Costs are easily traced to a specific product. Hence this option is incorrect.