Question

Identify the situations in which process-costing systems are appropriate?.....

Answer 1

Process costing method is generally used by those business organisation which are having multiple process for making a final product and which are making idenicali goods in batches

Example = petroleum companies etc

Process costing method helps organisations in many ways

* As there are more than one process it will help to identify deficiency in the process.

* If there is a deficiency it will help to take corrective action if required.

* Regular checks on each process can be done.

*Comparison can be made between cost of conducting process inside of the entity and cost to be incurred if process has been outsourced.

* Process costing method is used if the production is high in terms of quantity and product are similar.

In case of work in progress units output is considered from percentage of work completed.