Question

give an example of each of the type of costing systems used to determine the costs in petrochemical refinery and building construction

Answer 1

• For construction purpose, the organization need to monitor each contract separately and also accounting and reporting also hence the perfect system for construction is " Job Costing".

Example: To construct a giver "C-5 Road Project" then all the cost related to such job shall be accounted separately to know which costs are incurred for which project, as an organization's deals in many projects at a time.

• For the petrochemical refinery, the costing system is " Process costing" should be adopted. Usually, the petrochemical refinery has various stages in processing the refinery in such case the Process costing gives an accurate and appropriate base to determine the costs.

Example:

In a petrochemical refinery, the various processes like distillation, separation of waste and residue and filtration, the various products and also the byproducts the residue waste is also marketable and the product is also marketable at various stages means.

The product need not be completed always sometimes it is capable of being ready for sale at intermediate processes also hence in such cases it is better to adopt process costing so that at each process we can assesse the cost of the product based on the processes completed.