CA Intermediate · Cost and Management Accounting · Process & Operation Costing
Which of the following is a characteristic of operation costing as distinguished from process costing?
Operation costing is a hybrid method where costs are collected by operation, with material cost traced to batches and conversion cost averaged per operation. It suits standardised products made in batches, unlike pure process costing, which averages all costs over continuous output.
- AIt is used where standardised products pass through a series of operations and costs are accumulated by operation, with batches carrying differing material costsCorrect
- BIt is used only for continuous chemical production with no batches
- CIt does not compute cost per unit
- DIt treats every operation as a separate cost centre with no product costing
Explanation
Operation costing is a hybrid of job/batch and process costing. Material costs are batch specific, while conversion costs are averaged by operation. The other options misdescribe it.
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