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Mgt402 gdb idea solution by Binish Awais

Its 100% sure idea as per my knowledge:

 

 

Note:

• Your answer should not exceed 10 words
• Detailed reasons are not required, be concise
• Give your answer in the following format

 

Answer of gdb :

 

Costing system: _ Process Costing syestem

Reason:

JUST Select only two as per requrirement

 m mentioning here 4 reasons to support answer:

1- a mass production of homogeneous units

2- Production is not in response to customers' orders

3- same cost is chargeable to each unit.

4- Cost is associated only with departments and not with jobs

 

 

 

Refrences frome book to consult

Thesre are showing that this is the Process Costing system

Don't copy just take idea dear J

 

PAGE#124

On the other hand take the example of a company producing cement. All of the bags of cementproduced are quite similar. Here separate calculation of cost of cement supplied to each customer is neither desirable nor feasible. The company can calculate cost per bag of cementproduced by dividing total cost incurred during the accounting period by total number of bagsproduced during the period.

Accordingly, the company can fix the price per bag and bill each customer according to the

number of bags supplied to him. This company will use process costing system.

 

Page 131:

Examples of industries using Process Costing include:

Bottling, Pharmaceuticals, Cement, Paint, Coal, Distilleries Electricity, Ice, Soap, Sugar, Canning,Chemicals, Cooking oil, Electric appliances, Flour, Natural gas, Petroleum Products, Rubber, Steel,

Textile. Under process costing, for the purpose of cost control, each department involved in

manufacturing process is regarded as a cost centre and product costs are accumulated separatelyfor each department. Cost Centre means a division or segment for which an individual is made responsible

.for the incurrence of costDepartmental costs are passed through department work in process accounts and not through asingle work in process control account as in job costing. As all units are produced from the sameraw materials and by same manufacturing operations, therefore, it is assumed that same cost ischargeable to each unit. Instead of accumulating cost of individual units, an average unit cost iscomputed by dividing total cost by total output of the period. Cost is associated only with departments and not with jobs. 

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