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Chapter 2.4, BEC212899, BEC213818, BEC212875, BEC212876 - Coggle Diagram

- - - - Job-order costing is a method used to allocate and accumulate costs to a specific job or groups of unique products. All costs are accumulated by the job and this system helps in identifying cost and profit for each job. This costing method is usually appropriate when goods are unique or custom made i.e. they are heterogeneous and not homogenous in nature. Thus, statement I is incorrect.
      - Process costing is used where the production involves different stages involving uniform or similar products. Costs are collected for each process and averaged for each unit produced during a period.
      - Responsibility center is a unit of the organization for which a specific person is given in charge. It could be a cost center, profit center or revenue center. Costs are accumulated on a responsibility center level irrespective of the product costing method used. They are used for control purposes. Both job-order costing and process costing collect cost information on the basis of responsibility centers for control purposes. Thus, statement II is correct.
      - Activity based costing (ABC) is a method to apportion and allocate different costs based on cost drivers using a base which is most appropriate. For example, cost of purchasing departments may be apportioned based on number of purchasing transactions. Machine set up costs may be apportioned based on number of setups, etc. Job costing is not mutually exclusive with ABC as costs are accumulated to a job and include direct and indirect costs. Allocation of costs to individual jobs can be done using ABC. Thus, statement III is correct.