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If I have a candle company, what costing method is best to determine the cost of...

If I have a candle company, what costing method is best to determine the cost of products and services. Selecting from job costing, process costing, and activity-based costing. Why would it be the best option for the candle company?

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Answer #1

The costing method best to determine the cost of products for Candle Company is process costing.

The reason why process costing is best suited for Candle Company is due to following reasons

  • · Product passes through multiple departments before final product is ready for sale. The cost of one process is transferred to another process
  • · Production units are identical
  • · The product size is standardised for example: small candle, medium candle and large candles.
  • · The sales orders are not customer specific and is market driven
  • · The production is also standardised in terms of batches and output
  • · The production is also continuous basis and large scale
  • · Costs are accumulated at each level.

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