Question
In: Accounting
joe's machine shop repairs small engines of all types, and also produces custom made specialty engines....
joe's machine shop repairs small engines of all types, and also produces custom made specialty engines. each job is unique and may use different manufacturing processes that the company offers. what kind of a cost method would they use
A job order costing
B process costing
C ABC costing
D production costing
Solutions
Expert Solution
Answer
A) Job Order Costing.
- This costing method is applicable where the work consists of separate contract, batches or job, each of which is authorised by specific order contract.
- Costs are collected and accumulated acoording to jobs or contracts or work ordres.
- Job order costing system is used only when the products manufactured are sufficiently different from each other.
Suitability of job costing:
- When jobs are executed for different customers according to their specifications.
- When no two orders alike and each order/job need special treatment.
There, on the above points it is clear that that, for Joe's machine shop it is suitable to opt Job order costing as they produces custom made specialty engines
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