Which of the following companies will use a process costing system?
A) an oil refining company
B) a manufacturer of ships
C) a custom watch manufacturer
D) an advertising firm

Question

Quizplus · Accepted Answer

An oil refining company would use a process costing system as they produce a large quantity of identical products (gasoline, diesel, etc.) through a continuous process. This allows them to allocate costs evenly across all units produced.

B) A manufacturer of ships- A manufacturer of ships would most likely use a job-order costing system as each ship is unique and requires specific materials and labor.

C) A custom watch manufacturer- A custom watch manufacturer would use a job-order costing system as each watch is made to order and requires specific materials and labor.

D) An advertising firm- An advertising firm would not use either process costing or job-order costing as they do not produce physical products that need to be costed. They may use activity-based costing to allocate costs to different projects or clients.

Which of the Following Companies Will Use a Process Costing