The type of product costing system used by a company is dictated by the
A)cost flow assumptions made by the company.
B)production process of the product.
C)inventory system used by the company.
D)selling price of the product.

Question

Quizplus · Accepted Answer

The type of product costing system used by a company is dictated by the production process of the product. Different production processes require different costing systems. For example, job order costing is suited for custom-made products while process costing is suited for standardized products that are produced in large quantities. Therefore, the production process of the product is the primary determinant of the type of costing system used by a company. Cost flow assumptions, inventory system used, and selling price are important considerations but they are not the primary determinants of the costing system used by a company.

The Type of Product Costing System Used by a Company