The correct answer is: A. process costing
Process costing is a type of costing system used to assign costs to products or services that are produced in large quantities through a series of continuous processes. In process costing, costs are accumulated by department or process, and then assigned to products or services based on the number of units produced or the amount of resources used.
The classification and accumulation of costs by fixed and variable costs is of special importance in process costing because it allows managers to track the costs of production and identify areas where costs can be reduced. Fixed costs are costs that do not change in total with changes in the level of production, while variable costs are costs that change in total in direct proportion to changes in the level of production.
By classifying costs as fixed or variable, managers can identify the costs that are most affected by changes in production levels. This information can then be used to make decisions about how to increase or decrease production, or how to allocate resources to different products or services.
For example, if a company is considering increasing production of a particular product, it would want to know how much the cost of production would increase. By classifying the costs of production as fixed or variable, the company can estimate the total increase in costs and make a more informed decision about whether to increase production.
In addition, by tracking the costs of production, managers can identify areas where costs can be reduced. For example, if a company is producing a product with a high variable cost, it may be able to reduce costs by using less material or by finding a cheaper supplier.
Overall, the classification and accumulation of costs by fixed and variable costs is of special importance in process costing because it allows managers to track the costs of production and identify areas where costs can be reduced.