Question

What kind of a costing system should the following businesses have? State two reasons supporting each type.

1.Flower bouquet shop

2.Plastic bottles manufacturing company

3. Shampoo manufacturing company

Answer 1

1. Flower bouquet shop business: it is job costing having small production run.

It's an industry which is timeless. It is good business because flowers can be sold for marriages and decorations and other events. A lump sum can be received as profit from selling flowers. Almost 70% profit can be received and rest can be used for purchasing materials required for its business.

2. Plastic bottles manufacturing company:

It's a type of process costing, where large plastics can be sold. Making a new plastic is easier than recycling it because the effort; time and energy used is more for recycling it..it's a large industry manufacturing company.it is having a large production runs.

3. Shampoo manufacturing company: it's is a process costing because it's a homogeneous product which passes through series of similar process and department. They involve mass production.