CMA Intermediate · Cost Accounting · Process Costing
Which of the following industries is most suited to the use of process costing?
Cement manufacturing is best suited to process costing because output is continuous, standardised and homogeneous, flowing through successive processes. The other options involve customer-specific or contract work, where costs are accumulated for each individual job or contract rather than averaged over process output.
- AShip building to customer specification
- BBulk production of cement through continuous, uniform operationsCorrect
- CConstruction of a bridge under a long-term contract
- DMaking furniture against individual customer orders
Explanation
Process costing suits industries with continuous mass production of homogeneous units passing through successive processes, such as cement. Ship building, bridge construction and made-to-order furniture are job or contract situations where each cost unit is distinct and costs are collected per job or contract.
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