Which of the following would be most likely to use process costing?

Which of the following would be most likely to use process
costing?

a custom furniture manufacturer

a custom furniture manufacturer

a custom furniture manufacturer
a custom furniture manufacturer

an auto body repair shop

an auto body repair shop

an auto body repair shop
an auto body repair shop

a lawn fertilizer manufacturer

a lawn fertilizer manufacturer

a lawn fertilizer manufacturer
a lawn fertilizer manufacturer

a law firm

a law firm

a law firm
a law firm

General guidance

Concepts and reason
Operation costing: Operation costing is the type of costing involving both identical and different products. Thus, it is the combination of both job and process costing. It is mostly used in manufacturing companies.
Job order costing: Job order costing involves appropriation of manufacturing or production cost to individual jobs. It is suitable for companies manufacturing heterogeneous products.

Fundamentals

Process costing: Process costing is the type of costing that assigns cost to units of production. This type of costing is suitable for companies manufacturing homogeneous products. Thus, the cost of the product is known at each and every stage of production.

Step-by-step

Step 1 of 2

Justification for incorrect answers:
A custom furniture manufacturer uses job order costing system. Therefore, the statement “a custom furniture manufacturer uses process costing” is incorrect.
A law firm use job order costing system. Therefore, the statement “a law firm uses process costing” is incorrect.
An auto body repair shop uses job order costing system. Therefore, the statement “an auto body repair shop uses process costing” is incorrect.

The job order costing involves appropriation of production cost to individual jobs. In the case of a custom furniture manufacturer, the production cost of particular furniture is determined. Therefore, the custom furniture manufacturer uses the job order costing. A law firm uses a job order cost system; under this each individual’s case is calculated. Under the auto body repair shop, each vehicle is considered as separate job. Therefore, the auto body repair shop using job order costing system. Therefore, they are not using the process costing system. Hence, these are incorrect answers.

Based on the information given in the question, find the incorrect answers regarding the process costing.

Step 2 of 2

Justification for correct answer:
Process costing is a method of cost accounting, which is used where the process of manufacture is continuous and the product needs various processes to complete. This method is used to ascertain the cost of the product at each process or stage of production. Therefore, the lawn fertilizer manufacturer uses process costing. Therefore, the statement “a lawn fertilizer manufacturer uses process costing” is the correct answer.

A lawn fertilizer manufacturer uses process costing.

In the case of lawn fertilizer the process of manufacture is continuous and the product needs various processes to complete. Hence, the statement “a lawn fertilizer manufacturer use process costing” is the correct answer.

Do not consider the custom furniture manufacturer uses process costing system. The custom furniture manufacturer uses job order costing system.

Answer

A lawn fertilizer manufacturer uses process costing.

Answer only

A lawn fertilizer manufacturer uses process costing.

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