The correct answer is: A. process costing
Process costing is a costing method used to assign costs to products or services that are mass-produced in a continuous process. In process costing, costs are accumulated by department or process, and then allocated to units of production using a predetermined cost per unit.
Fixed factory overheads are costs that do not vary with the volume of production, such as depreciation on factory buildings and equipment. In process costing, fixed factory overheads are typically allocated to units of production using a predetermined rate based on the estimated total fixed factory overheads for the period and the estimated total units of production for the period.
The other options are incorrect because:
- B. activity based costing is a costing method that assigns costs to products or services based on the activities that are required to produce them. In activity based costing, costs are accumulated by activity, and then allocated to products or services using a predetermined cost per activity.
- C. marginal costing is a costing method that only includes variable costs in the cost of goods sold. Fixed costs are treated as period costs and are expensed in the period in which they are incurred.
- D. standard costing is a costing method that uses predetermined standards to assign costs to products or services. Standard costs are set in advance of production and are based on expected costs for materials, labor, and overhead.