Process Costing

A work at be trunk is a costing governance in which the cost of a product or service is obtained by designation cost to masses of like or akin(predicate) units. Unit costs are then calculated on an average basis. Process costing systems are employ in industries that produce like or similar units which are often mass produced. In these industries, products are manufactured in a very similar way. The companies usually use the aforesaid(prenominal) tote up of direct materials, direct manufacturing labor costs and manufacturing overhead costs (CliffNotes watch Guide, 1999).Industries that use physical process costing systems are for example chemical processing, anele refining, pharmaceuticals, plastics, brick and tile manufacturing, semiconductor chips, beverages and breakfast cereals. The business order cost systemis used when products are made based on specific customer orders. Each product produced is mooted a job. Costs are tracked by job. Services rendered can also be considered a job. Service companies consider the creation of a financial plan by a informed financial planner, or of an estate plan by an attorney, unique jobs.The job order cost system must capture and track by job the costs of producing each job, which includes materials, labor, and overhead in a manufacturing surroundings (Willkommen, 2000). The difference between job costing and process costing is the extent of averaging used to compute unit costs of product and services. The cost tendency in job costing is a job that constitutes a clear identifiable product or service. The quantity of manufacturing resources is different in whatever job. It would be incorrect to cost each job at the same average manufacturing cost.So, when like or similar units are mass produced, process costing averages manufacturing costs over all units produced (CliffNotes Study Guide, 1999). The costs of a product are important for inventory calculations, pricing decisions and product gainfulness ana lysis. Its also important for measuring how well the management is through with(p) and if costs are reduced effectively. A company I worked for used a hybrid system that used mostly a process costing system and certain aspects of the job order cost system. The system broke down separate material costs, overhead and labor.The system was plumb accurate and helped us maintain a healthy profit and ordinate certain aspects of the business as needed. References Accounting Principles II Job stage Cost System . (1999). CliffsNotes Study Guides . Retrieved July 21, 2012, from http//www. cliffsnotes. com/study_guide/Job-Order-Cost-System. topicArticleId-21248,articleId-21222. html Process Costing Systems. (2000). Willkommen in Ralf KAnigs Netzbehausung. Retrieved July 21, 2012, from http//www. koenig-aalen. de/vorstellung/present/pcs. php