ECONOMICS

Detailed explanation-1: -Process costing systems are an effective means of allocating the total costs of producing homogeneous products that are manufactured in a continuous multi-step process where the outputs of one function represent the inputs to a subsequent process until production of a unit is complete.

Detailed explanation-2: -The process costing method is typically used for processes that produce large quantities of homogeneous products. The process costing method is in contrast to other costing methods, such as product costing, job costing, or operation costing systems. Using the process costing method is optimal under certain conditions.

Detailed explanation-3: -A business that produces homogeneous products on a large scale would use process costing to determine the amount of money spent on each individual process over a particular period, while those dealing in unique, heterogeneous wares would use job costing to determine the cost of each individual unit made.

Detailed explanation-4: -Process costing is used in companies that produce very homogeneous products or services. Process costing uses the same inventory accounts as job order costing to record the flow of manufacturing costs.

Detailed explanation-5: -Process costing is not applicable to heterogeneous products because they are unique products. Examples are yachts and hand-made products. In this kind of product, job order costing is appropriate to be used as costing method.