Question

a. under what conditions would it be appropriate to use a process costing system

b. in what ways are job order and process costing similar

c. Why is accumulation simpler in a process costing than it is in a job order costing system.

Answer 1

a). Process costing system accumulates costs when a large number of identical units are being produced. It is most efficient to accumulate costs at an aggregate level for a large batch of products and then allocate them to the individual units produced. There is a assumption that each unit cost is same.This method is used where it is impossible to identify the cost of each specific unit.
Conclusion:- Process Costing system is appropriate in situations where a homogeneous product is produced on a continuous basis.

b). Similarities of Job Order and Process Costing system:
1). Both systems have the same basic purposes to assign materials, labor, and overhead to products and to provide a mechanism for computing unit product costs.
2). Both systems use the same basic manufacturing accounts, including Manufacturing Overhead, Raw Materials, Work In Process, and Finished Goods.
3). Flow of costs through the manufacturing accounts is basically the same in both systems.

c). Cost accumulation is simpler under process costing because costs only need to identify by department not by separate job. A company normally has a small number of processing departments, whereas there can be hundred or even thousands of jobs in job order costing for which calculations of cost is not a easy task.