Management Accounting Question 1 - Identify two products you purchased in the last year—one for under...

Management Accounting

Question 1 - Identify two products you purchased in the last year—one for under $5 and one for over $100—and indicate whether you think they were accounted for using job order costing or process costing and why.

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A product I bought last year costing below $5 is Lube oil. The lube oil manufacturing is accounted for by using Process costing. Process costing is used when nearly identical units are mass produced. Lube oil manufacturing involves different processes like sedimentation, Fractioning/heating, filtering, mixing additives etc. The unit products are indistinguishable from each other. It involves large production runs going through processes/departments. Process costing involves accumulating costs at process/department level. Process costing is ideal for standardized products produced in large quantities.

A product I bought last year costing above $100 is a customized Sofa/Furniture. Manufacturing of Customized products are accounted for using job costing. Costs are accumulated at Job level. Job costing is used for unique product, produced in small numbers. As the product is non-standard, accumulation of costs at process/batch level will not help and it has to be a job level.

ekkarill92 answered 7 months ago

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