COST & MANAGEMENT ACCOUNTING

PROCESS COSTING
What is Process Costing? Purpose of Process Costing and Industry Applications PRESENTED TO
Prof. M. A. Ghanachari

PRESENTED BY NAME
Tanuj Patidar Deepak Patil Mayur Patil Vijay Patil Aniket Patwardhan

ROLL NO.
41 42 43 44 45

WHAT IS PROCESS COSTING?

Process costing is a method of costing used to find out the cost of the product in each process. It is used to calculate cost per unit of product is ascertained at each stage of production.

It is a form of operations costing.

Process costing is used in industries like chemicals, textiles, steel, rubber, sugar, shoes, petrol, etc.

FEATURES OF PROCESS COSTING

The production is continuous. The product is homogeneous. The product is standardized. Output of one process become raw material of another process. Costs are collected process-wise. The total cost of each process is divided by the normal output of that process to find out cost per unit of that process.

ADVANTAGES & LIMITATIONS OF PROCESS COSTING

ADVANTAGES
Periodical determination of cost Simple and cheap Managerial control Standard processes and products

LIMITATIONS
No detailed analysis

Historical costs
Estimates Difficult to calculate average cost where more than one type of products is manufactured.

METHODS OF PROCESS COSTING

FIFO Method:
It follows the principle that materials used should carry the actual experienced cost of the specific units used.

It is more complex.
It is more accurate. It is used where size and costs is large.

Weighted Average Method:

It assumes that all costs, whether from a preceding period or the current one are lumped together and assigned to produce units. It is simple to calculate It is used where assigning a specific cost to an individual unit impossible.

PURPOSE OF PROCESS COSTING

To control the process To know cumulative cost To calculate the value of inventory of raw material, work-inprogress and finished goods at the end of the period. It is also used to assign price of the products.

INDUSTRY APPLICATION OF PROCESS COSTING

Process costing is mainly used in manufacturing industry. Following are the industries where process costing applied: Identical Products Industries Industries with Multiple Departments Industries with Interchangeable Parts Industries with Varying Product Features Innovative Industries