• The costing method applicable where goods or services result from a sequence of continuous or repetitive operations or processes. Costs are average over the units produced during the period, being initially charged to the operation or process.Hence, process costing:
• Determines the cost per unit of product in an environment where IDENTICAL product is produced for all customers;
• Examples: Automobile assembly line-all cars coming out are identical; electronic assembly line where all products is identical; biscuit manufacturing though has more than one product line, each line is a separate, continuous process producing identical products; food production,etc
• In these production processes, it is NOT POSSIBLE to readily identify specific quantities of input with each unit of output.

• The product of one process becomes the INPUT OR RAW MATERIAL of the next process;

• There is a CONTINUOUS FLOW OF IDENTICAL OUTPUT;

• It is DIFFICULT TO IDENTIFY A COST UNIT because each cost unit is part of a process;

• It is difficult to cost a cost unit hence we can only find the AVERAGE COST PER UNIT overperiod of time;

• COST CENTRES are set up and costs are collected by the cost centres;

• In process costing when manufacturing the main product(s), BY-PRODUCTS may emerge. However, these by-products need to be further processed to be marketable;

• It is possible that JOINT PRODUCTS may be produced in the processes;

• WASTE may arise during processing eg due to evaporation, etc

• Each process or department performs a particular operation(s). A certain stage of production is completed in each process. Each process is carried out by a certain department. A person is usually responsible for a process.

• An account called a PROCESS ACCOUNT is maintained for each process.This process account captures/records the following:

            ·All costs-materials, labor and overheads;

         ·Scrap;

         ·Output;

         ·Opening work-in-process;

         ·Closng work-in-process;

         ·Transfers from previous process and

            ·Losses or gains