Which of the following statements best defines an operation costing system?
A) It is identical to a process costing system except that actual manufacturing overhead costs are traced to units of product.
B) It is the same as a process costing system except that direct materials costs are accounted for in the same way as in job-order costing system.
C) It is the same as a job-order costing system except that direct materials costs are accounted for in the same way as in a process costing system.
D) It is identical to a job-order costing system except that actual manufacturing overhead costs are traced to units of product.

Question

Quizplus · Accepted Answer

An operation costing system is a hybrid costing system that combines elements of both process costing and job-order costing systems. In this system, direct materials costs are accounted for in the same way as in a job-order costing system, while manufacturing overhead costs are assigned to products based on the operations or processes they have undergone, similar to a process costing system. Option A and D are similar to each other but their descriptions are incorrect. Option C is incorrect because it describes a job-order costing system rather than an operation costing system.

Which of the Following Statements Best Defines an Operation Costing