CMA Intermediate · Cost Accounting · Process Costing
Which statement about the applicability of process costing is correct?
Process costing is applicable to continuous-production industries such as chemicals, textiles and sugar, where homogeneous output passes through successive processes. It handles by-products and is not confined to service industries or order-wise pricing.
- AIt cannot be used where by-products arise
- BIt is applied only to service industries
- CIt can be used in industries like chemicals, textiles and sugar where production is continuousCorrect
- DIt requires every unit to be priced on a cost-plus basis for each order
Explanation
Process costing applies to continuous-production manufacturing such as chemicals, textiles and sugar. By-products can be handled within it, and it is not limited to services or based on order-wise pricing.
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