Which one of the following enterprises would most likely use a process costing system ?
Answers
Explanation:
A process costing system is used by companies that produce similar or identical units of product in batches employing a consistent process. Examples of companies that use process costing include Chevron Corporation (petroleum products), the Wrigley Company (chewing gum), and Pittsburgh Paints (paint).
Which of the following companies would most likely use a process costing system?
A. A large computer manufacturer where each computer is made to customer specifications.
B. A luxury home builder
C. A law firm
D. A manufacturer of cereals
The correct answer is :
D. A manufacturer of cereals
Explanation :
The manufacturer of cereals will most likely use the process costing system because process costing is used to track the costs of products that are uniform in nature and are produced as a single mass production. Hence, the maximum utilization of the process cost will be done by the producer of the grain as the grain is produced on the largest scale by the producer.
The manufacturer of cereals is suitable for products that are standardized and are uniform in nature and are produced in large quantities. Job costing is done for those goods and services, which are unique in nature.
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