You are a cost accountant working with a consultancy that advises different types of businesses. A few clients have approached you seeking advice on…
CA Intermediate · Cost and Management Accounting · MTP · January 2026
You are a cost accountant working with a consultancy that advises different types of businesses. A few clients have approached you seeking advice on the best costing methods for their operations. Analyze each of the following businesses and recommend the most suitable method of costing for each, explaining your reasoning:" (i) A company that manufactures cement in large quantities. (ii) A custom furniture workshop which designs unique pieces per customer. (iii) A pharmaceutical company that produces medicine in batches. (iv) A food processing unit producing packaged snacks on a continuous basis. (v) A transport company that operates a fleet of buses across cities.
Suggested Answer and Working Notes:
Business Scenario Costing Method Key Reason Cement Manufacturing Unit/Output Costing Uniform products, mass production. Custom Furniture Workshop Job Costing Unique, custom jobs per client. Pharmaceutical Company Batch Costing Production in identifiable batches. Food Processing (Snacks) Process Costing Continuous and standardized production. Bus Transport Company Service/Operating Costing Costing per service unit (e.g., km, passenger-km).
Topics: Marginal Costing, Process & Operation Costing, Service Costing
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