Characteristics of process costing system

Process costing system is employed by industries possessing following characteristics:

1. There is mass production of a single product or two or
2. more products in successive runs of scheduled duration e.g., vegetable canning or fruit juice bottling. .
3. All units of output are exactly similar and are produced by
4. the same manufacturing process.
5. Entire manufacturing process is divided into departments or processes. Each department performs a specific set of operations.
6. Completed output of each department, except the last one is the raw materials for the next department.
7. Manufacturing operations may result in production of joint products or by products.
8. Production is not in response to customers’ orders but in anticipation of demand.

Other Related Accounting Articles:

• Difference between job costing and process costing
• Definition and Explanation of Process Costing System
• Service Department Costing
• Flow of Costs
• Effect of Change in Fixed Cost, Sales Price and Sales Volume on Contribution Margin and Profitability
• Standard Costing System Discussion Questions and Answers
• Reciprocal Method of Cost Allocation – Service Department Costing
• Controlling and Costing Materials
• Selecting Allocation Base
• Step Method of Cost Allocation