Question

1. Which type of cost system, process or job order, would be best suited for each of the following: (a) TV assembler, (b) building contractor, (c) automobile repair shop, (d) paper manufacturer, (e) custom jewelry manufacturer? Give reasons for your answers.
2. In a job order cost system, direct labor and factory overhead applied are debited to individual jobs. How are these items treated in a process cost system and why?
3. Cite and give credit to the author that you are citing

Answer 1

A) T.v Assembler

Batch cost system is best suited for T.V assembler. This is beacuse even though different sizes of t.v sets are produced but they not produced according to specific customer specification. Therefore batch costing is preferred.

b) Building Contractor- As each contract of a building is different and vary from other and buildings are made according to the specification of the customer involved,therefore job order costing should be used

c). Automobile repair shop: As each automobile which is given for repairement requires different parts/equipments and each repair is of different duration therefore job order costing is preferred.

d) Paper manufacturing: As the paper is manufactured in bulk quantity and the product is of homogeneous nature and also all the goods are not made according to the specification of customers hence process costing should be used.

e) Custom Jewelry manufacturer: As each and every order for jewelery given to the manufacturer is supposed to be different from one another hence job order costing should be used.

Part B

In process cost sytem, direct labour and factory overhead are debited to Work in Process Inventory account of each of the production department. The reason behind this difference is that in job order cost system, goods are not homogeneous in nature and different from each other, hence debited to individual jobs but process costing involves identical products, hence debited to work in process inventory account of each department.