ECONOMICS

Detailed explanation-1: -Discrete production losses are assumed to occur at the specific point in production process and it will be detected only when the firm performed a quality control inspection.

Detailed explanation-2: -Process costing is used when a single product is made on a continuous basis. The units produced are identical. Job order costing is used when different jobs are worked each period. Process costing accumulates manufacturing costs (raw material, direct labor and manufacturing overhead) by processing department.

Detailed explanation-3: -Since production is continuous, there may be some units which are not finished at the end of an accounting period. Work-in-Progress is valued in terms of equivalent or effective production units. To show production process completely, we have to convert incomplete units into equivalent units.

Detailed explanation-4: -Process costing is a type of operation costing which is used to ascertain the cost of a product at each process or stage of manufacture. CIMA defines process costing as “The costing method applicable where goods or services result from a sequence of continuous or repetitive operations or processes.