CA Intermediate · Cost and Management Accounting · Process & Operation Costing
Which statement about operation costing is correct?
Operation costing is a refinement of process costing used in mass production, where the cost of each operation is separately ascertained. It does not ignore operation-wise costs and is not restricted to job order industries.
- AIt is used where production is continuous and each process produces a different product with no common cost
- BIt is a refinement of process costing applied to mass production where costs are ascertained for each operationCorrect
- CIt is applicable only to job order industries
- DIt ignores the cost of each operation and finds only total cost
Explanation
Operation costing is a refinement of process costing, used in standardised mass production such as textiles or engineering parts, where cost is computed for each operation. It is not limited to job work and does take operation-wise cost.
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