Process costing is a form of operations costing which is used where standardized homogeneous goods are produced. This costing method is used in industries like chemicals, textiles, steel, rubber, sugar, shoes, petrol etc. Process costing is also used in the assembly type of industries as well.
The following are advantages of the process costing
- Costs are to be computed periodically at the end of a particular period
- It is simple and involves less clerical work than job costing
- It is easy to allocate the expenses to processes in order to have accurate costs.
- Use of standard costing systems in very effective in process costing situations.
- Process costing helps in preparation of tender, quotations
- Since cost data is available for each process, operation and department, good management and control are possible.