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- Process costing is a method of costing used mainly in manufacturing where units are
continuously mass-produced through one or more processes.
1. The primary goal of cost accounting is the collection of data intended to give
management precise knowledge on the costs associated with producing a good. The
type of manufacturing processes will determine the best cost accounting system for a
specific company.
2. Cost accounting guides businesses' pricing decisions to ensure profitability and
identifies areas where they may be able to better control costs.
- Job order cost accumulation systems accumulate three basic elements of a product's
cost according to department or cost center, while process cost systems charge
individual work in process inventory accounts for the costs incurred in processing units.
Upon completion of each job, the cost is transferred to finished goods inventory.
- Job costing sometimes includes customer billing to specify the precise costs associated
with each stage of the completion of a certain task or order. Process costing does not
always concentrate on the precise cost of each component of the process; instead,
expenses build up by each process or processing department.
- Manufacturing companies would benefit from understanding both task order costing and
process costing, as they can both be used to estimate product costs. Both work order
costing and process costing, which use roughly the same data to determine unit cost,
can be used by your company to track production costs and allocate resources, such as
time, materials, and labor, to your products.