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Q17E

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Horngren'S Financial And Managerial Accounting
Found in: Page 1010

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Short Answer

For each of the following products or services, indicate if the cost would most likely be determined using a job order costing system or a process costing system.

a. Soft drinks

b. Automobile repairs

c. Customized furniture

d. Aluminum foil

e. Lawn chairs

f. Chocolate candy bars

g. Hospital surgery

h. Pencils

S.No.

Particulars

Classification of costing system

A

Soft drinks

Process costing system

B

Automobile repairs

Job order costing system

C

Customized furniture

Job order costing system

D

Aluminium foil

Process costing system

E

Lawn chairs

Process costing system

F

Chocolate candy bars

Process costing system

G

Hospital surgery

Job order costing system

H

Pencils

Process costing system

See the step by step solution

Step by Step Solution

Step-by-Step Solution:Step 1: Costing System

Manufacturing companies use a costing system to determine the total cost incurred by the company. The costing of products is done either by the process or job order costing system.

Step 2: Classify the costing system used by the soft drinks manufacturer

The companies engaged in making soft drinks use a process costing system. It is so because the production of soft drinks passes through several cycles and is produced in large quantities.

Step 3: Classify the costing system used for the Automobile repairs

The automobile repairer uses a job order costing system to determine the cost of the repairing work because their work is based on a job basis and as per the customer's requirement.

Step 4: Classify the costing system used by the manufacturer of the customized furniture

Job order costing system used by the customized furniture manufacturer as they work as per the customer's requirement. They manufacture the furniture in small size as per the customer's demand.

Step 5: Classify the costing system used by the manufacturer of Aluminium foil

The aluminum foil manufacturing companies use a process costing system because the foils are manufactured in mass quantities by passing through more than one process.

Step 6: Classify the costing system used by the manufacturer of Lawn chairs

The lawn chairs manufacturer uses the process costing system for determining the cost of production. It is so because they are engaged in single-line products produced in large quantities.

Step 7: Classify the costing system used by the manufacturer of chocolate candy bars

The chocolate candy bars manufacturer uses a process costing system for computing the total manufacturing cost. It is so because the candy bars are manufactured in large quantities.

Step 8: Classify the costing system used by the hospitals for surgeries

The cost of surgeries is determined by using the job order costing system because the cost of different surgeries is different. Also, it is service providing business. Hence, a job order costing system is used.

Step 9: Classify the costing system used by the manufacturer of pencils

The manufacturer of pencils uses the process costing system while determining the cost of production. It is so because the manufacturer of pencils produced pencils in mass quantities by passing through various processes.

Most popular questions for Business-studies Textbooks

Cheerful Colors manufactures crayons in a three-step process: mixing, molding, and packaging. The Mixing Department combines the direct materials of paraffin wax and pigments. The heated mixture is pumped to the Molding Department, where it is poured into molds. After the molds cool, the crayons are removed from the molds and are transferred to the Packaging Department, where paper wrappers are added and the crayons are boxed.

In the Mixing Department, the direct materials are added at the beginning of the

process and the conversion costs are incurred evenly throughout the process. Work in process of the Mixing Department on March 1, 2018, consisted of 800 batches of crayons that were 10% of the way through the production process. The beginning balance in Work-in-Process Inventory—Mixing was $32,800, which consisted of $14,000 in direct materials costs and $18,800 in conversion costs. During March, 5,200 batches were started in production. The Mixing Department transferred 3,000 batches to the Molding Department in March, and 3,000 were still in process on March 31. This ending inventory was 80% of the way through the mixing process. Cheerful Colors uses FIFO process costing.

At March 31, before recording the transfer of costs from the Mixing Department

to the Molding Department, the Cheerful Colors general ledger included the following account:

Work-in-process inventory – Mixing

Balance, March 1

32,800

Direct materials

42,000

Direct labor

24,610

Manufacturing overhead

65,830

Requirements

1. Prepare a production cost report for the Mixing Department for March. Round

equivalent unit of production costs to four decimal places. Round all other costs to the nearest whole dollar.

2. Journalize all transactions affecting the Mixing Department during March, including the entries that have already been posted. Assume labor costs are accrued and not yet paid.

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