Question

For each of the following statements, determine if it applies to Process Costing, Job Costing, Both, or Neither. Matching

-       I.       II.       III.       IV.    Conversion costs are included in the cost of the product.       -       I.       II.       III.       IV.    A baker with a shop that makes specialty wedding cakes will use this type of Product Costing System.       -       I.       II.       III.       IV.    Costs are assigned to the product as it is manufactured.       -       I.       II.       III.       IV.    A company that makes a variety of vibrant paint colors for interior walls will use this type of Product Costing System.       -       I.       II.       III.       IV.    Multiple Work In Process Inventory accounts are maintained by the company.       -       I.       II.       III.       IV.    The company offers many different products that each have a specialized manufacturing process.

I. Process Costing System Only II. Neither Job Costing or Process Costing III. Both Job Costing and Process Costing IV. Job Costing System Only

Answer 1

1. Conversion costs are included in the cost of the product : This statement applies to both job order costing and process costing since cost incurred in converting raw materials to finished goods are included in the cost of finished goods.

2. A baker with a shop that makes specialty wedding cakes will use this kind of product costing system: The correct answer is job order costing since job order costing is applied in cases where finished product is unique from each other (here specialty cakes) unlike process costing which is applied in the production of large batches of same product.

3. Costs are assigned to the product as it is manufactured: This statement applies to process costing since as the product passes through various processes, the process cost is applied to the work-in-progress inventory.

4. A company that makes a variety of vibrant paint colors for interior walls will use this type of Product costing system: The correct answer is neither job order costing nor process costing, since job order costing is used for specialized single job order while process costing is used for a single homogenous product.

5. Multiple work in progress inventory accounts are maintained by the Company: This applies to process costing since work in progress accounts of direct materials, conversion costs,etc. are maintained.

6. The Company offers many different products that each have a specialized manufacturing process: This applies to job order costing since each product has a specialized manufacturing process.

7.