29. Process Costing Introduction - Cost Accounting Subject Video Lecture | Commerce & Accountancy Optional Notes for UPSC

1. What is process costing and how is it different from job costing? $#

Ans. Process costing is a costing method used to determine the cost of producing each unit in a continuous production process. It is different from job costing, which is used for unique, custom-made products or services where each unit is different from the others.

2. What are the main steps involved in process costing? $#

Ans. The main steps involved in process costing include calculating the equivalent units of production, determining the cost per equivalent unit, assigning costs to completed units and units in ending work in process, and reconciling the costs.

3. How is the cost per equivalent unit calculated in process costing? $#

Ans. The cost per equivalent unit is calculated by dividing the total costs (direct materials, direct labor, and overhead) for a particular process by the total equivalent units of production for that process.

4. What is the purpose of using process costing in cost accounting? $#

Ans. The purpose of using process costing in cost accounting is to accurately allocate costs to each unit produced in a continuous production process. This helps in determining the cost of production, evaluating performance, and making informed decisions about pricing and profitability.

5. Can process costing be used in both manufacturing and service industries? $#

Ans. Yes, process costing can be used in both manufacturing and service industries where a continuous production process is involved. It helps in determining the cost of producing each unit, whether it is a physical product or a service.