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Process costing is used for which kind of manufacturing?
ACustom orders that differ from each other
BLarge quantities of identical items in flow
CSmall batches finished at a single station
DServices billed to individual customers
Answer & Solution
Correct answer: B. Large quantities of identical items in flow
1. Process costing suits large quantities of identical items manufactured in a continuous flow.
2. The flow runs on a first in, first out basis, so the first batch started is the first completed.
3. Breakfast cereal, phones and cars are the kinds of products costed this way.
4. Orders that differ from one another are unique, and unique work is costed by job order costing instead.
_Source: Jonick, Principles of Managerial Accounting (UNG Press, CC BY-SA 4.0), section 3.1 Introduction_
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