Multiple Choice
Which of the following is true for a service company?
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4. Merchandising Operations
Service Company vs. Merchandising Company
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A job order costing system is most likely used by which of the following types of companies?
A
A fast-food restaurant
B
A grocery store
C
A custom furniture manufacturer
D
A law firm
Verified step by step guidance1
Understand the concept of a job order costing system: It is a costing method used to allocate costs to specific jobs or projects, typically when products or services are customized and vary significantly from one order to another.
Analyze the characteristics of the companies listed in the problem: A fast-food restaurant and a grocery store typically produce or sell standardized products in large quantities, which makes them more suited for process costing rather than job order costing.
Consider the nature of a custom furniture manufacturer: This type of company produces unique, customized furniture pieces based on individual customer orders, making it ideal for a job order costing system since costs can be tracked for each specific job.
Evaluate the law firm: While a law firm provides services that can be tailored to individual clients, it typically uses a time-based billing system rather than a job order costing system, as the focus is on tracking billable hours rather than specific job costs.
Conclude that the correct answer is a custom furniture manufacturer, as it aligns with the characteristics of a job order costing system, which is designed for tracking costs of customized and unique jobs.
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