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 also.
In process costing, it is assumed that the average cost presents the cost per unit. The cost of production during a particular period is divided by the number of units produced during that period to arrive at the cost per unit.
Process costing is a method of costing under which all costs are accumulated for each stage of production or process, and the cost per unit of product is ascertained at each stage of production by dividing the cost of each process by the normal output of that process.