Multiple Choice
Which of the following is true of a process cost system?
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4. Merchandising Operations
Service Company vs. Merchandising Company
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Which of the following companies is least likely to use job order costing?
A
A grocery store
B
A law firm
C
A custom furniture manufacturer
D
A printing company specializing in custom orders
Verified step by step guidance1
Understand the concept of job order costing: Job order costing is a system used to assign costs to specific jobs or orders, typically when products or services are customized or produced in small batches. It tracks direct materials, direct labor, and overhead costs for each job individually.
Analyze the nature of each company listed: Determine whether the company produces customized products or services that would require tracking costs for individual jobs.
Evaluate the grocery store: Grocery stores typically sell standardized products in large quantities and do not produce customized goods or services. Therefore, they are unlikely to use job order costing.
Consider the law firm, custom furniture manufacturer, and printing company: These businesses often provide customized services or products, such as legal cases, bespoke furniture, or custom printing orders, making job order costing suitable for them.
Conclude that the grocery store is least likely to use job order costing because its operations involve standardized products rather than customized jobs.
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