Question

Why is process costing needed in some companies or industries?

	a.	To separate out the selling, general and administrative costs from the production process costs.
	b.	Because in process costing companies, product costs are recorded as expenses (on the income statement) as they are incurred.
	c.	Because in process costing companies, a job cost sheet tracks each of the product costs as they are incurred.
	d.	To separate out the costs of partially completed items as they move across the production process.

Answer 1

Ans:

Process costing is a method where production process costs are identified at different processing stages. This is to identify the costs transferred and costs of partially completed items as they move across production process.

So correct answer is option D.

To separate out the costs of partially completed items as they move across the production process.

* Option A is incorrect because separating selling and administration expenses are done in variable costing.

* Option B is incorrect because on income statement periodically costs are recorded.

*Option C is incorrect because in process costing cost of each process is identified and not of each product.

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