Process Costing

1. Process costing is a cost accounting technique that is used when products are produced in a more-or-less continuous basis and when the products are indistinguishable from each other. Costs are accumulated by department, rather than by order as in job order costing, and are applied uniformly to all units that pass through the process during a period. Process costing is normally FIFO or weighted average. See also job order costing and cost driver and FIFO method of process costing and weighted average method of process costing. A method of allocating manufacturing cost to mass-produced identical or similar products to determine an average cost per unit. Each unit receives the same manufacturing input as every other unit. Refineries, paper mills, and food-processing companies are examples that use process costing.