Process costing is used when
A) the production process is continuous.
B) production is aimed at filling a specific customer order.
C) dissimilar products are involved.
D) costs are to be assigned to specific jobs.

Question

Quizplus · Accepted Answer

Process costing is used when the production process is continuous and involves the mass production of identical or similar products. The costs of each production process are accumulated and then divided by the total number of units produced to calculate the cost per unit. This method is useful for industries such as chemical, oil refining, and food manufacturing, where the production process involves multiple stages and the final product is homogeneous. Option B is incorrect because in a customer order-based production system, job costing is used to track the costs associated with each specific customer order. Option C is incorrect because when dissimilar products are produced, job costing is used to track the costs associated with each specific product. Option D is incorrect because job costing is used when costs are to be assigned to specific jobs.

Process Costing Is Used When