CA Intermediate · Cost and Management Accounting · Process & Operation Costing
Which statement best describes operation costing as distinguished from process costing?
Operation costing collects and ascertains costs operation by operation for standardised operations performed on batches or units. It refines process costing and suits industries like textiles or engineering with distinct operations, rather than customer-specific jobs or only continuous chemical production.
- AIt is used where standardised operations are carried out on batches of units, and costs are collected operation-wiseCorrect
- BIt is used only for continuous chemical production with no work in progress
- CIt is a method that charges all costs to a specific customer job
- DIt is a method used only for service businesses such as hospitals
Explanation
Operation costing is a refinement of process costing where cost is accumulated by each operation, often for batches of similar products. It is not limited to chemicals, is not job-specific, and is not restricted to services.
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