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Application of Process Costing


The following are some of the industries where process costing system is normally applied.

Paper mills

Biscuit works

Oil refining

Chemical works

Soap making

Distillation process

Sugar mills

Paint, Ink and

Varnishing etc.

Meat Products Factory

Milk Dairy

Textile, Weaving,

Spinning etc.

Food Products

Coke Works

Gas Manufacturing

In the real sense, process costing may be adopted in organisations producing a single commodity in bulk or a group of products of different types. 


(i)                 Production is a continuous flow and the final product is the result of sequence of processes. 

(ii)               Clearly defined process cost centres 

(iii)             Different types of products with or without by-products are simultaneously produced at one or more stages of manufacture. 

(iv)              Under the method of process costing normal and abnormal losses or gains are to be treated properly. 

(v)                The output of one process becomes the raw material of another process. 

(vi)              All the finished products are uniform and all units are exactly identical during one or more processes. 

(vii)            To calculate the effective units of production is possible under this method, even all the inputs may not be converted into finished goods.