A process costing system is a technique or costing system which determine the total cost of a unit of merchandise.This system is widely used in those environments where production passes through more than one cost centers.
Uses of process costing system:
They are used in those industries which produce similar units on a large scale and also they manufacture these products in a same way .For example,Production within a large corporation might require the product to move through more than one department like procurement,manufacturing,quality assurance and distribution.
The industries that use process costing system use the same amount of direct materials,direct manufacturing labor costs and use the same amount of manufacture overhead costs.Following are the industries that use process costing system.
In process costing system each department has its own budget so as a result of this process costing system must be in place to compile the respective cost which should be undertaken by each group.
Difference between job costing and process costing:
There is a difference between job costing and process costing is that the Job costing is an order -Specific costing technique which is used in those situations where job is different and is performed to the customers specification while process costing system is performed under same situations where you have the same amount of direct materials,labor costs and manufacturing overhead costs.
The quantity of manufacturing resources is different in both Job costing and process costing systems.Time period is different between both Job Costing and Process costing .Process costing has a time frame for certain months or even years for which costs are accumulated while job costing has no time frame it ends after the completion of a particular job so that costs are accumulated for each job separately.
Process costing is applicable to ascertain the cost of standardize products produce in mass while job costing is applied to ascertain the cost of a specific order received.the quantity of labor and other facilities are different in both systems.Process costing accumulates manufacturing cost for department or processes while job costing uses cost sheet and accumulates manufacturing costs for each job or batch separately.
Unit cost ascertainment:
Unit cost ascertainment are different on both job costing and process costing. In process costing, Process costing divides total departmental process costs by the departmental process output to derive the unit cost while Job costing obtains unit cost by dividing the total cost of the job by the job order units....
Uses of process costing system:
They are used in those industries which produce similar units on a large scale and also they manufacture these products in a same way .For example,Production within a large corporation might require the product to move through more than one department like procurement,manufacturing,quality assurance and distribution.
The industries that use process costing system use the same amount of direct materials,direct manufacturing labor costs and use the same amount of manufacture overhead costs.Following are the industries that use process costing system.
- Chemical processing industries
- Oil Refining
- Plastics
- Brick and Tile Manufacturing
- Beverages
- Breakfast Cereals
- Pharmaceuticals etc.
In process costing system each department has its own budget so as a result of this process costing system must be in place to compile the respective cost which should be undertaken by each group.
Difference between job costing and process costing:
There is a difference between job costing and process costing is that the Job costing is an order -Specific costing technique which is used in those situations where job is different and is performed to the customers specification while process costing system is performed under same situations where you have the same amount of direct materials,labor costs and manufacturing overhead costs.
The quantity of manufacturing resources is different in both Job costing and process costing systems.Time period is different between both Job Costing and Process costing .Process costing has a time frame for certain months or even years for which costs are accumulated while job costing has no time frame it ends after the completion of a particular job so that costs are accumulated for each job separately.
Process costing is applicable to ascertain the cost of standardize products produce in mass while job costing is applied to ascertain the cost of a specific order received.the quantity of labor and other facilities are different in both systems.Process costing accumulates manufacturing cost for department or processes while job costing uses cost sheet and accumulates manufacturing costs for each job or batch separately.
Unit cost ascertainment:
Unit cost ascertainment are different on both job costing and process costing. In process costing, Process costing divides total departmental process costs by the departmental process output to derive the unit cost while Job costing obtains unit cost by dividing the total cost of the job by the job order units....
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