Question

Identify the situations in which process-costing systems are appropriate​

Answer 1

Process costing is a form of operation costing. It is used to ascertain the cost of product at each stage of production.

        The main feature of process costing is,

• The production is in continuous flow and products are homogeneous in nature.
• In process costing products lose their individuality because they are produced in a continuous flow.
• To compute the average cost per unit, we can divide the Total cost of each process by the Total production.
• Costs are calculated at the end of a cost period.
• In process costing, controlling is comparatively more easier.

The process Costing is suitably employed in ;

-Where goods are made for stock and production is continuous or goods are made to customers order are, owing to the continuous nature of the production.

Application of process costing

Following are the examples of industries where process costing is applied;

• Chemical works               
• Soap making
• Box making
• Distillation process
• Oil refining
• Food products, Biscuit works
• Milk dairy
• Paint, Ink and Vanishing etc.
• Textiles, weaving, spinning etc.