Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 10

A friend owns and operates a consulting firm that works for a single client under one consulting agreement. The consulting firm bills the client monthly for charges incurred. She asks you whether you would recommend a job costing or process costing system for her business. What would you recommend? Why?

Step 1 of 2

Process Costing is advisable for industries which produce homogenous products on a large scale. Industries giving different treatment to products on the basis of specifications of customers should not consider process costing. Job costing should be used for industries in which focus is made on individual unit or batch produced on the basis of customer specifications.

Thus, when decision is based on individual unit costing, job costing is preferable.