CAT / FIA FMA Syllabus C. Cost Accounting Techniques - Characteristics of process costing - Notes ^{4 / 17}

Process costing is a costing method used where it is not possible to identify separate units of production, or jobs, usually because of the continuous nature of the production processes involved.

All the products in the process are identical and indistinguishable from each other.

The essence of process costing involves the averaging of the total costs of each process over the total output of the process

Average cost per unit = Costs of production / Expected or normal output

The output of one process forms the material input of the next process.

Also, closing work-in-progress (WIP) at the end of one period forms the opening WIP at the beginning of the next period.