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Q. 17-23RQ

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Horngren'S Financial And Managerial Accounting
Found in: Page 938

Short Answer

Why would the manager of a service company need to use job order costing?

The job order costing system is used by the manager of the service company because it helps in ensuring that the customers are charged correctly, and allows the company to adjust the pricing on future similar job if required.

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Step by Step Solution

Service companies

Service companies means the companies which are incorporated to provide services of any kind. Its income is generated by providing the services instead of selling the products.

Job order costing

Job order costin system is a system that determines the price of each individual product and ensures that the cost is reasonable or not. In service sector companies, it is used to ensure whether the service fees charged by the companies are correct or not. And if the pricing is not correct then it helps the company in adjusting the price for future projects.

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