Question

All of the following statements are correct when referring to process costing except:

A. Costs are accumulated by department.

B. A process costing system has the same basic purposes as a job-order costing system.

C. Units produced are indistinguishable from each other.

D. Process costing would be appropriate for a movie studio that makes a handful of hit movies per year.

E. Process costing would be appropriate for a breakfast cereal manufacturer

Answer 1

Answer:-

Correct option is D

Companies that produce identical units of product in batches using a consistent process track costs with a process costing system.

A job costing system records revenues and costs for each job. Because each job results in a unique product and has different material and labor requirements.

A movie studio produces unique movie and each movie has different material and labour requirement. It does not produces identical movies in batches. Hence it uses job costing.

Revenues and costs for each movie is recorded separately to see if it is profitable.

Breakfast cereal manufacturer uses process costing to pocess cereal through different process.