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What are the advantages and disadvantage of Process Costing?

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What are the advantages and disadvantage of Process Costing?
posted Jul 7, 2017 by Shantanu Arora

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The following are the advantages of process costing:
a. It is simple and less expensive to find out the cost of each process.
b. It is easy to allocate the expense to process in order to have accurate costs.
c. Production activity in process costing is standardized. Hence, managerial control and supervision become easier.
d. In process costing, the products are homogeneous. As a result, costs per unit can be easily computed by averaging the total cost and price quotations become easier.
e. It is possible to determine process costs periodically at short integrals.

Disadvantages of process costing
The following are the disadvantages of process costing:
a. The cost obtained at the end of the accounting period is historical in nature and is of little use for effective's managerial control.
b. Since process cost is average cost, it may not be accurate for analysis, evaluation and control the performance of various departments.
c. Once an error is committed in one process, it is carried to the subsequent processes.
d. Process costing does not evaluate the efficiency of individual workers or supervisor.
e. The computation of average cost is difficult in those cases where more than one type of product is manufactured.

answer Jul 8, 2017 by Sunita