Refer to the Hotbox Ltd production process details in problem 21.25.

Required Explain in detail, using the facts from Problem 21.25 why it is most appropriate for Hotbox Ltd to use a process costing system rather than a job order costing system. Your answer should be no less than 250 words and should relate to the steps evident in the construction of cardboard pizza boxes.

Details from problem 21.25

Hotbox Ltd produces pizza boxes using two processes — cutting and packaging. The production budget for the year ending 30 June 2025 estimated raw materials use of $400 000, factory overhead of $270 000, direct labour costs of $190 000 and 168 750 machine hours. (Ignore GST.)
During April 2025, the following transactions were recorded:
1. Raw materials transferred to cutting, $21 600.
Raw materials transferred to packaging, $28 000.
2. Direct labour costs incurred by cutting, $15 800.
Direct labour costs incurred by packaging, $20 200.
3. Machine hours used by cutting, 13 800 hours.
Machine hours used by packaging, 17 600 hours.
4. Other production costs for April were as follows.

5. Product with an assigned cost of $61 400 was transferred from cutting to packaging.
6. Overhead was applied in each department based on machine hours used. (A predetermined rate based on estimated overheads and total machine hours over both departments is to be calculated.)
7. Raw material purchases were $56 000.
8. Goods with an assigned cost of $136 000 were transferred from packaging to finished goods.
9. Finished goods with an assigned cost of $140 000 were sold on credit for $162 000.
10. Beginning inventory as at 1 April comprised the following amounts.

Transcribed Image Text:

Factory supplies Depreciation Repairs Insurance $25 400 16500 6200 1 700