A process costing system is used when:
A) Homogeneous items are produced in a continuous-flow production process.
B) Batches of identical inventory items are produced.
C) A company produces unique, one-of-a-kind inventory items.
D) All of these answers are correct.

Question

Quizplus · Accepted Answer

A process costing system is used when homogeneous items are produced in a continuous-flow production process. This production process involves treating each unit of output as identical to the others, and therefore it is necessary to track costs to determine the cost per unit. This is best achieved through the use of process costing, which allocates costs over a specific period of time to each unit of output. B and C are incorrect because batch production and unique, one-of-a-kind items production are best suited to a job order costing system.

A Process Costing System Is Used When