Features/Characteristics of Process Costing Process Costing Method is applicable where the output results from a sequence of continuous or repetitive

operations or processes and products are identical and cannot be segregated. Process Costing enables the ascertainment of cost of the product at each process or stage of manufacture. The following features may be identified with process costing: 1. The output consists of products which are homogenous. 2. Production is carried on in different stages (each of which is called a process) having a continuous flow. 3. Production takes place continuously except in cases where the plant and machinery are shut down for maintenance etc. Output is uniform and all units are identical during each process. It would not be possible to trace the identity of any particular lot of output to any lot of input. 4. The input will pass through two or more processes before it takes the shape of the output. The output of each process becomes the input for the next process until the final product is obtained, with the last process giving the final product. 5. The output of a process (except the last) may also be saleable in which case the process may generate some profit. 6. The input of a process (except the first) may be capable of being acquired from the outside sources. 7. The output of a process is transferred to the next process generally at cost to the process. It may also be transferred at market price to enable checking efficiency of operations in comparison to the market conditions. 8. Normal and abnormal losses may arise in the processes There are a number of industries in which process costing can be applied. Features of Process Costing: Production is continuous in a series of stages called processes. Each Process is deemed as a cost centre and costs are accumulated for each process separately along with finished output and in progress. Products and Processes are standardised. The output of one process becomes the raw material to the next process,usually till the final product is completed. The cost of the previous process is transferred to the next process along with the output.Sometimes, the transfer may be at a transfer price inclusive of profit.

There may be process losses of the input.They may be normal or abnormal or both. Completed and semi-finished goods must be expressed in common terms for cost determination. Since Production is of identical units, the total cost of a process is to be divided with the unit of output to obtain the average cost per unit. Two or more products may be produced unavoidably in the same process.They may be of equal importance or of disproportionate values. It is not possible or necessary to trace or identify specific loss of material inputs with product or output.

process costing
Definition
Method for determining the total unit cost of the output of a continuous production run (such as in food processing, petroleum, and textile industries) in which a product passes through several processes (or cost centers). It involves the following steps: (1) the 'total cost per process' is computed by estimating the number of products passing through each process in a given period; (2) the 'unit cost per process' is computed by dividing the 'total cost per process' by the number of units passing through the process in the given period; (3) the 'unit cost per process' is charged to each unit as it passes through each process so that, at the end of the production cycle, each product will have received an appropriate charge for each process through which it has passed.

Standard Costing
Standard Costing Overview Standard costing is the process of creating and using estimated costs for production activities, usually under the assumption of normal operating conditions. Since standard costs do not necessarily match actual costs incurred, the cost accountant must calculate variances between actual and standard costs, and charge the variances to the cost of goods sold. By doing so, an entity is essentially recording actual costs

Budget is what you have decided to pay for it and standard cost is what it actually costs standard cost is a set price of one goods and services, while budget is a flexible price of one goods and services