ECONOMICS

Detailed explanation-1: -In a process costing system, a separate work in process inventory account is maintained for each customer’s job. Conversion costs include materials, direct labor, and factory overhead. Industries that typically use process cost systems include chemicals, oil, metals, food, paper, and pharmaceuticals.

Detailed explanation-2: -In process costing, a separate Work in Process account is maintained for each processing department. Instead of using a job cost sheet, production reports are prepared for each department (or process) to accumulate costs of production and to account for units worked on.

Detailed explanation-3: -a Work in Process account is maintained for each process. one Work in Process account is maintained for all the processes, similar to a job order cost system. a materials requisition must identify the job on which the materials will be used.

Detailed explanation-4: -Recall the three inventory accounts that accountants use to track product cost information-raw materials inventory, work-in-process inventory, and finished goods inventory. These three inventory accounts are used to record product cost information for both process costing and job costing systems.

Detailed explanation-5: -In a process cost system, each department accumulates its costs to compute the value of work in process inventory, so there will be a work in process inventory for each manufacturing or production department as well as an inventory cost for finished goods inventory.