Comfort Co., a new company under Fast Fashion Industries, decided to manufacture a new leather jacket design for their upcoming fall collection. The jackets may be personalized with the customer's name and symbol of choice printed at the back of the jacket. In order to centralize the customization process, the jackets will be sold as an online exclusive which customers can have delivered directly to their location. Due to the nature of fast fashion businesses, Comfort minimizes the amount of units on-hand as a practice.

 

Gina V., Comfort's controller, took an interest in the concept of kaizen budgeting and thought to herself whether it would be an appropriate practice for Comfort. Currently, she is busy reviewing the budget for the upcoming quarter and is unsure about the following items:

 

•Sales volume projected for the next quarter 

•Allocation of material fixed costs to Comfort's individual units

•Appropriate cost accumulation system to use: process or job order costing

 

Question:

a. Which cost accumulation system should Comfort employ: process costing or job order costing?

b. If Comfort uses the direct (variable) method, how will it address Gina's concerns on the allocation of material fixed costs to production units?

Answer rating: 100% (QA)

a Comfort should employ job order costing for the production of their personalized leather jackets J... View the full answer