Firms should use a process costing system when they produce products that:
A)Are semi-homogeneous.
B)Pass through a series of manufacturing processes.
C)Pass through only one department.
D)Have small batch sizes.

Question

Quizplus · Accepted Answer

Process costing is typically used when a product goes through a series of manufacturing processes, such as in a factory setting. This type of costing system tracks the costs incurred at each stage of production and assigns them to the final product, which is useful for determining the total cost of production and setting prices. Semi-homogeneous products may also be appropriate for process costing, but the other options (passing through only one department or having small batch sizes) do not necessarily require this type of costing system.

Firms Should Use a Process Costing System When They Produce