Process Costing Is Applicable to Production Operations That

question 27

Multiple Choice

Process costing is applicable to production operations that

• A) utilize several processes, departments, or work cells in a series.
• B) do not assign overhead costs to operations.
• C) produce products that are made to order.
• D) are found in only a few industries.

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Definitions:

Idle Capacity

The condition where equipment or workspaces are not being used to their full potential, often resulting in inefficiency and lost productivity.

Resource Consumption

The usage of resources such as materials, labor, and energy in the production of goods or services.

Activity-Based Costing

A cost distribution method that assigns overhead and indirect expenses to pertinent products and services based on their activity requirements.

Customer Margin

The profit derived from serving a particular customer, calculated as sales revenue minus the costs of servicing that customer.