Process costing is a method used to calculate the cost of products manufactured in continuous and repetitive processes. It determines costs at each stage of production. Key features include continuous production of homogeneous and standardized outputs where the output of one process becomes the input of another. Costs are collected by process and divided by normal output to determine a cost per unit. The purpose is to control processes, determine cumulative costs, value inventory, and assign product prices. Advantages include periodic cost determination, simplicity, and managerial control while limitations include historical costs and difficulty with multiple product types.

1. PRESTIGE INSTITUTE OF MANAGEMENT
GWALIOR (M.P)
By = Shivam Sharma
MBA ( int. )

2. Introduction
of process
costing
Features of
process of
costing
Advantage &
limitations of
process
costing
Purpose of
process
costing

3. Introduction of 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.

4. 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.

5. Advantages & limitations of process
costing
• Periodical determination of cost
• Simple and cheap
• Managerial control
• Standard processes and products
• No detailed analysis
• Historical costs
• Estimates
• Difficult to calculate average cost where
more than one type of products is
manufactured.
ADVANTAGES LIMITATIONS

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