Continuous-operation Costing

Abstract

Cost accounting methods can be divided into two main groups. We looked at the first group, specific-order costing, in Chapter 16. The second group is continuous-operation costing which is a system of costing applied to industries where the method of production is in continuous operation — for example, bottling or electricity generation. This costing system is essentially a form of average costing which is a method of obtaining unit costs in which the items produced have a high degree of homogeneity. The unit cost is obtained by dividing the total production cost by the number of items produced.