Now that you understand the differences between the 2 most popular cost accounti

Question

Now that you understand the differences between the 2 most popular cost accounting systems, please post a reply to this question.

You are a new blue jeans manufacturer and is starting operations this month. You must decide on which cost accounting system to use in order to account for your manufacturing costs. You can choose from using the job order cost system or the process cost system.

What system would you choose and why? Please be detailed in your answer as to why you chose the specific system.

I don't want the answer to be copied.

Explanation / Answer

Solution:

Under job costing, separate records maintained for each special jobs. This costing method is used where work is performed as per client instructions. In process costing, cost records are maintained for every process and cost is transferred from one department to other to arrive complete cost of products.

As jeans manufacturing is a regular business in which jeans are manufactured and sold in the market, thereofore process costing method should be applied for accounting. Jeans is not manufactured as special instruction from customers and cost is not vary according order received from clients as it does not requires any special work from job to job, therefore there is no need to maintain seprated cost records of each job.

Cost should be accumulated process wise to arrvie product cost of Jeans.

In view of abor process costing method should be used for jeans manufacturing.

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