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What is Process Costing, what are the various features of Process Costing?

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What is Process Costing, what are the various features of Process Costing?
posted Jul 7, 2017 by Shantanu Arora

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Process Costing is a form of operation costing used where production follows a series of sequential process. According to I.C.M.A., London, “it is that form of operation costing where standardised goods are produced”. “It is a system for applying costs to like products that are mass produced in continuous fashion through a series of production steps called processes” — Horgren.

The following are the common features that exist in most process costing systems:

(i) Process cost centers are clearly defined and all costs are accumulated by the cost centers. Both direct and indirect costs are accumulated in cost accounts.

(ii) The maintenance of accurate records of units and part units produced and the cost incurred by each process.

(iii) The averaging of the total costs of each process over the total production of that process.

(iv) The charging of the total cost of earlier process as the raw material input cost of the following process.

(v) Procedures for separating costs where the process produces two or more products (joint products) or where by-products arise during production are clearly defined.

(vi) If units are lost or spoiled in a process or department such loss is borne by the units completed and remaining within the department and thus average cost is increased.

answer Jul 8, 2017 by Sunita
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