Question

Job costing is commonly used to estimate costs in airplane production.

Group of answer choices

True

False

Answer 1

Answer: TRUE

Job costing (also called job order costing) is best suited to those situations where goods and services are produced upon receipt of a customer orders, according to customer specifications, or in separate batches. For example, a ship builder would likely accumulate costs for each ship produced. An aircraft manufacturer would find this method logical. Construction companies and home builders would naturally gravitate to a job costing approach. Each job is somewhat unique. Materials and labor can be readily traced to each job, and the cost assignment logically.

Job order cost accounting is a type of costing that is used when it is fairly easy to track costs to a specific job. This type of accounting is used for large item manufacturing or for services that are large in comparison to a firm's income. For example, a manufacturer that makes airplanes would use this type of accounting, as would a lawyer. In both of these instances, the actual costs for the airplane and for a client's case are collected and reported as costs for these specific items.

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