ECONOMICS

Detailed explanation-1: -A process costing system accumulates costs when a large number of identical units are being produced. In this situation, 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.

Detailed explanation-2: -In a process costing system, costs are accumulated by department. Raw material costs can be added only to the first processing department in a process costing system. Under the weighted-average method of process costing, each unit transferred out is considered as an equivalent unit.

Detailed explanation-3: -Focusing on a certain item, the value obtained by adding the external cost (the cost of assembling or manufacturing constituent items) to the internal cost of the item itself is called Accumulated Cost.

Detailed explanation-4: -Process costing is a method of costing under which all costs are accumulated for each stage of production or process, and the Page 2 2 cost per unit of product is ascertained at each stage of production by dividing the cost of each process by the normal output of that process.