PROCESS COSTING

Meaning
Process costing is that form of costing which
is used where standardized goods are
produced in large volume with continuous
production flow.
For example: chemical industries, soap
making, oil refineries, paper mills, textile food
products etc.
eatures
ontinuous flow
Homogeneous product
Accumulation of all costs by department or
process
Transfer to finished goods
Raw materials lose their identity
Unit cost is obtained by accumulating all
costs and dividing it by units produced.
/;antages:
Possible to have managerial control
Easy to quote the prices
Determine process costs periodically
isa/;antages
osts are historical in nature and not very
effective in cost control
Valuation of W-Ì-P is done on estimate basis
Different products arising out of same Raw
material it is difficult to know the exact cost
Process isa/;antages losses/gain
ormal loss - unavoidable
Abnormal loss- avoidable/unexpected in
nature. Abnormal Loss =Actual loss-ormal
loss
Value of abnormal loss=ormal cost of
normal output/normal output x Abnormal loss
units
Abnormal gain=actual loss is less then
normal loss