Features of Process Costing
The following are the features of production in industries where process costing is
applicable:
1) The production is a continuous flow of identical units.
2) The entire production of goods can be identified as several distinct stages and
theses stages are called processes.
3) The output or finished goods of one process becomes the input or raw materials
of the immediate next process.
4) The output of the last process is transferred to the finished goods stock
account.
5) Accounting of costs, units, different inputs is done separately for each process.
6) Avoidable and unavoidable losses arise during these processes.
7) The goods are transferred from one stage to another at cost price generally. In
some cases, however they are transferred at a profit just to compare them with
market prices and also to measure the efficiency of the production departments.
8) All the processes are standardized and all the goods are homogeneous.
9) Since the production consists of identical units, the cost per unit can b e
calculated by dividing the total cost of a process by the total number of units of
output in that process.
10) The identity of any lot of raw materials cannot be found out in the finished
goods.
11) The factory is divided into departments based on the processes.
12) Joint and by products emerge at various stages of production.
