Question

What type of costing system would you use for a clothing company? Why did you select this costing system?

Answer 1

Process costing system would be most appropriate system of costing for a clothing company.

A clothing company generally produces homogeneous products so it cannot use job order costing.

A clothing company has many processes such as Measuring, Cutting, Stitching, Dying, etc for which Process costing would be a better choice. Generally every process is dependent on other processes such as, Stitching cannot be done until cutting is completed. Different processes has different costs and any process can also be outsourced if in-house cost is more than market price of that process. This Outsources is done to reduce cost of business but can only be achieved if process costing is done and all processes are treated as a separate cost centre.