.A process cost system would be used for all of the following products except
a.chemicals.
b.computer chips.
c.motion pictures.
d.soft drinks.
The correct answer and explanation is :
The correct answer is:
c. motion pictures.
Explanation
A process cost system is a costing method used for mass production of identical or homogeneous products. It accumulates costs for a continuous flow of products that go through multiple production stages. This system is commonly used in industries where it is difficult to identify costs for individual units because production is continuous and standardized.
Now, let’s analyze each option:
- Chemicals (a) – The chemical industry involves continuous production processes, such as refining, mixing, and blending, where identical products are produced in large volumes. Since costs are accumulated over a process and then averaged, a process cost system is ideal.
- Computer Chips (b) – The manufacturing of computer chips involves a sequence of standardized production steps (etching, doping, layering, etc.). Each step adds cost to the product, and since all chips are identical within a production batch, a process cost system is appropriate.
- Motion Pictures (c) – This is the correct answer. Unlike the other industries, movie production is not a continuous or standardized process. Each film is a unique project with its own set of actors, scripts, locations, and editing requirements. The costs are accumulated per project, making a job order costing system a better fit. Job order costing tracks costs for each unique project or job, rather than averaging costs over a continuous process.
- Soft Drinks (d) – Soft drink production is a continuous process, where raw materials (water, sugar, flavors) go through bottling, packaging, and labeling in an assembly-line format. Since identical units are produced in bulk, a process cost system is the best choice.
Conclusion
A process cost system is ideal for industries that manufacture homogeneous products in a continuous production environment. Since motion pictures are unique and produced individually, a job order cost system is a better fit, making motion pictures the exception in this list.