Managerial Accounting

Business

Quiz 4 :
Process Costing and Hybrid Product-Costing Systems

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Quiz 4 :
Process Costing and Hybrid Product-Costing Systems

The primary differences between job order and process costing are: img

Process costing: Process costing is a type of product costing which is used to ascertain the cost of a product at particular process or stage of manufacture. Process costing is appropriate for the companies that produce a continuous mass of identical units, through a series of operations or process. The five types of manufacturing business in which process costing is chosen as product costing system are as follows: 1. Textile industry - Textiles are produced only after the cotton passes through the processes such as ginning, spinning, weaving, printing etc. 2. Oil Refinery - The process of refining starts with crude oil. It passes through so many processes like coker, reformer, alkylation, fluid catalytic cracking, desulfurization, hydro treating, hydrocracking, and isomerization. 3. Sugar industry - Sugar is produced from sugar cane. The process includes juice extraction, juice clarification, juice evaporation, crystallization, centrifuging, and back end refineries. 4. Steel Industry - Steel is manufactured form iron after undergoing several processes. 5. Paper industry - Paper is made from trees. The process of making paper begins with chemical pulping, mechanical pulping, Deinking, additives, producing paper, and ends with finishing. The key characteristic of these products is that the final finished product is obtained only after the raw material passes through different standardized and sequential stages of production i.e., "Processes".

Process costing: Process costing is a type of product costing which is used to ascertain the cost of a product at particular process or stage of manufacture. Process costing is appropriate for the companies that produce a continuous mass of identical units, through a series of operations or process. Non-manufacturing businesses that use process costing: 1. Processing of tests in a medical diagnostic laboratory. 2. Processing of tax returns by the Internal Revenue Service, and 3. Processing of loan applications in a bank. These are all service providing organizations and not manufacturing businesses.