Process costing is used by processing or manufacturing companies to ascertain the cost of production at each stage or process of production. It helps to evaluate the efficiency and control unnecessary costs. Separate cost center, transfer of output to next process, mass volume of production, difficult to differentiate etc. are some notable characteristics or features of process costing.
The main features of process costing can be described as follows:
1. Separate Cost Center
In process costing, each factory/department work , plant or division is considered as separate cost center.
2. Continuity
Processing work is carried on continuously by means of one or more process.
The main features of process costing can be described as follows:
1. Separate Cost Center
In process costing, each factory/department work , plant or division is considered as separate cost center.
2. Continuity
Processing work is carried on continuously by means of one or more process.
3. Transferring The Output
The output of one process is passed on to the next process as an input till the finished goods are realized.
4. Mass Volume
The finished goods are normally of a common size of mass volume.
5. Impossible To Differentiate
The output is not possible to be differentiated from the input lot or batch as in edible oil with the lot of oil seed fed for crushing.
6. By-products
Production of finished goods incidentally may give by-products lie oil cake in oil mills and bagasse of solid waste product and molasses of semi-liquid sweet product in a sugar industry.