Determining the proper costing system Professor Julia Silverman received the following e-mail message. “I don’t know if you remember me. I am Tim Wallace. I was in your introductory accounting class a couple of years ago. I recently graduated and have just started my first real job. I remember you talking about job-order and process costing systems. I even looked the subject up in the textbook you wrote. In that book, you say that a process costing system is used when a company produces a single, homogeneous, high-volume, low-cost product. Well, the company I am working for makes T-shirts. All of the shirts are the same. They don’t cost much, and we make nearly a million of them every year. The only difference in any of the shirts is the label we sew in them. We make the shirts for about 20 different companies. It seems to me that we should be using a process costing system. Even so, our accounting people are using a job-order costing system. Unfortunately, you didn’t tell us what to do when the company we work for is screwed up. I need some advice. Should I tell them they are using the wrong accounting system? I know I am new around here, and I don’t want to offend anybody, but if your book is right, the company would be better off if it started using a process costing system. Some of these people around here didn’t go to college, and I’m afraid they don’t know what they are doing. I guess that’s why they hired someone with a degree. Am I right about this or what?”
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Assume that you are Professor Silverman. Write a return e-mail responding to Mr. Wallace’s inquiry.