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Chapter 18: Q1RQ (page 1005)

Question: What types of companies use job order costing systems?

Short Answer

Expert verified

Answer:

The companies that manufacture the specific or unique products in small quantities and provide specialized services to the customers or clients of the company uses the job order costing system.

Step by step solution

01

Costing system

The costing system means the system which is used by the company for valuing the cost of the products produced by the company.

02

Job order costing system

Any company engaged in manufacturing the unique product or the products in small quantities or the product as per the customer demand, uses the job order costing system for deteriming the production costing system. It is the system to identify the cost of every job separately.

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Most popular questions from this chapter

Describe ways the production cost report can be used by management.

Rick Pines and Joe Lopez are the plant managers for High Mountain Lumber鈥檚 particle board division. High Mountain Lumber has adopted a just-in-time management philosophy. Each plant combines wood chips with chemical adhesives to produce particle board to order, and all product is sold as soon as it is completed. Laura Green is High Mountain Lumber鈥檚 regional controller. All of High Mountain Lumber鈥檚 plants and divisions send Green their production and cost information. While reviewing the numbers of the two particle board plants, she is surprised to find that both plants estimate their ending Work-in-Process Inventories at 75% complete, which is higher than usual. Green calls Lopez, whom she has known for some time. He admits that to ensure their division would meet its profit goal and that both he and Pines would make their bonus (which is based on division profit), they agreed to inflate the percentage completion. Lopez explains, 鈥淒etermining the percent complete always requires judgment.

Whatever the percent complete, we鈥檒l finish the Work-in-Process Inventory first thing next year.鈥�

Requirements

  1. How would inflating the percentage completion of ending Work-in-Process Inventory help Pines and Lopez get their bonus?
  2. The particle board division is the largest of High Mountain Lumber鈥檚 divisions. If Green does not correct the percentage completion of this year鈥檚 ending Work-in-Process Inventory, how will the misstatement affect High Mountain Lumber鈥檚 financial statements?
  3. Evaluate Lopez鈥檚 justification, including the effect, if any, on next year鈥檚 financial statements.
  4. Address the following: What is the ethical issue? What are the options? What are the potential consequences? What should Green do?

Question: What are the primary differences between job order costing systems and process costing systems?

Question: Refer to Short Exercises S18-8 and S18-9. Use Complete Foods鈥檚 costs per equivalent unit of production for direct materials and conversion costs that you calculated in Short Exercise S18-9.

Calculate the cost of the 38,000 units completed and transferred out and the

24,000 units, 20% complete, in the ending Work-in-Process Inventory.

Question: What types of companies use process costing systems?
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