Which of the following statements about processing costing is false?
A. Multiple choice 2 process costing accumulates costs by department
B. Process costing assigns departmental costs uniformly to all identical units that pass through the department during a period
C. Process costing systems compute unit costs by department
D. Process costing is used when a company produces a continuous flow of units that are distinguishable from one another
The false statement about process costing among the given options is option D. Process costing is used when a company produces a continuous flow of units that are NOT distinguishable from one another. The purpose of process costing is to assign the average cost of production to each unit, assuming that all units are identical or nearly identical.
Process costing is a method used to determine the average cost of producing each unit in a continuous manufacturing process where the output is homogeneous or nearly identical. This means that process costing is used when the company produces a large volume of units that are indistinguishable from each other.
For example, in a soft drink bottling plant, thousands of bottles of identical soft drinks are produced in a continuous process. The cost of producing each bottle cannot be individually calculated, as each bottle is the same as the one before and after it.
Therefore, statement D is false because process costing is used for products that are not distinguishable from each other, and the main objective is to determine the average cost of production per unit by allocating the total cost of the process to the total number of units produced.