Process costing
Process costing accumulates costs for a continuous or repetitive production process producing similar units, then assigns costs to output and any work in progress. It is suitable for operations such as chemical processing or food production where tracing each identical unit as a separate job would be impractical. Normal and abnormal losses and joint output may require separate treatment. Detailed equivalent-unit methods are deeper supporting techniques and should not be assumed examinable solely from a broad process-costing heading.
Worked example
A mixing process costs $90,000 and produces 30,000 comparable completed litres with no work in progress or losses. Cost is $3 per litre.
Common mistake
Do not divide total cost by physical output without considering normal loss, different stages of completion or by-products where the facts require them.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | MA | Direct | September 2026–June 2027 |
| FIA | FMA | Direct | September 2026–June 2027 |