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 |
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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