Question

Standard per Cake tem and Ingredients Cost $6,000 (depreciated over 5 years on a SL basis. No salvage vakue) $0 (provided by the landlord) $0 (paid for by dad) $24 per 8 pounds bag $2 per dozen S15 per 25 pounds bag $6 per 14 pound boix $6.50 per 4 pounds $8 per 2 pounds Conventional oven Refigerator Baking pans, licenses Baking flour 1 pound 4 ety* 1 pound Sugar Baking Soda Butter Raīsins 1 pound 1/2 pound Others (currants, diced date, Mitmeg. molasses) Cash register Rum (akohol) Utilities fincludes gas, electric and water) Mobile phone {business) Salary Keisha Salary - nieces Salary - aunt Accountant Estimated MOH $30 for all 4 boxes per month 12 per month (rental for 2 years) $12 per bottle 1/4 qtr of bottle per month per month per month $8 per hour $100 per month $100 per month $4 per cake 1 person 1.5 hours per cake

Mary discussed the business pan with her accounting professor who agreed to serve as her part time accountant. His first advice was for the business to develop a budget. Since Mary did not complete Accounting II, she was not aware of the various costing systems that exist in businesses. Her accounting professor told Mary of the three types of costing systems that exist in organizations – job order, process costing and, activity based costing.

Required: Which type of costing system is M&J Bakery most likely to use? Discuss?

Answer 1

The answer is Job Order Costing.

Explanation - Due to the nature of the business each order is specialized and different from the other orders. Therefore, the logical choice of costing methods would be job order costing. Job order costing is a costing method used when many different products are produced in a given period. Even though the company is only making one product, Process costing would not be considered the best choice since each cake is made to specific order and therefore considered a different job. Activity based costing would not be considered the best choice because it is typically used as a supplement to the one of the other costing systems.