Question

Which one of the following is a costing system commonly used by companies that produce a...

Which one of the following is a costing system commonly used by companies that produce a large number of homogeneous units in a continuous production process?

A.

Process costing system
B.

Incremental analysis cost system
C.

Unit costing system
D.

Job-order system
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Answer #1

Answer: A. Process Costing System

Explanation:

Under process costing system, costs are accumulated when a large number of identical or homogeneous units are being produced. It is actually a method of assigning costs to units of production generally used by the organizations that produce large quantities of homogeneous products.

Option B is wrong as Incremental analysis is used to determine the cost difference between certain alternatives. Option C is wrong as Unit costing is a method of costing under which cost are ascertained per unit of a single product. Option D is wrong as Job order costing is used when a customers order small and unique product.

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