Advantages of Process Costing


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Process costing has the following advantages:

 

(i)                 Process cost may be determined periodically at short intervals. When predetermined overhead rates are in use, it may be possible to complete unit cost weekly or even daily. This not always so under the job costing system, particularly when jobs run for long periods and there are no significant units of completed production during the various accounting periods, falling between the total period of run of the jobs.

(ii)               It involves less efforts and less clerical expenses as the accounting method is simpler than that in job costing.

(iii)             Detailed cost, budgeted as well as actual, are made available for each possible by evaluating the performance of each process etc.

(iv)             Allocation of overhead to departments and processes can be made fairly accurately on definite bases.

(v)               Since the material consumption ass the various operations are more or less standardized, more accurate cost estimates are available for price quotations.

(vi)             It is easier to set effective and fairly stable standards in case of mass production or continuous repetitive production. Process costing situations are, therefore, more adaptable for installing standard costing procedures.


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