Question

The computer workstation furniture manufacturing that Santana Rey started for Business Solutions is progressing well. Santana uses a job order costing system to account for the production costs of this product line. Santana is wondering whether process costing might be a better method for her to keep track of and monitor her production costs. 1. What are the features that distinguish job order costing from process costing? 2. Should Santana continue to use job order costing or switch to process costing for her workstation furniture manufacturing? Explain.

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Requirement 1

The following are features that distinguish job order costing from process costing:

  • Type of product - Job order costing produces units with different production requirement while in process costing, all units of product are identical.
  • Costing - In job order, costs are accumulated by individual job while in process, costs are accumulated by department.
  • Computation of unit cost - In job order, unit costs are computed by job on the job cost sheet while in process, unit costs are computed by department.

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