Question

KB Homes is a nationwide home builder that develops entire communities of dozens and even hundreds of homes, in addition to, building custom homes for individual customers. While a Job Costing system is appropriate for the custom home building, their new controller is planning on using a Process Costing system for the large developments. She argues that because even large developments of 100 homes only offer three or four different floor plans and thus would be more efficient for tracking costs because of the homogeneity. Do you agree or disagree? Why?

Answer 1

Answer is explained in the explanation section below.

Step-by-step explanation:

Yes, I do agree.

Reasoning:

The Argument of the new supervisors in favor of applying the technological calculation to large projects which have homogeneous buildings with 3-4 different floor plans is correct. There are no settings for buildings / dwellings with the same layout and all units go through the same processes and use the same funds. For major developments of a homogeneous nature, instead of creating works to make for each unit and cost collection separately for each unit, a process that costs each floor a plan as a separate product will be much easier and more efficient for control purposes.

This procedure will also provide important data, and reintroduction and monitoring will be much easier.

Creating individual work, so that it is only more difficult to follow a work order, costs and to monitor a large number of work orders at a given moment, which can easily be avoided by adopting a process that costs money.

Therefore, the arguments put forward by the new controller are quite acceptable.