process costing

Popular Terms
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.

Use 'process costing' in a Sentence

We suggested the accountant use process costing to best get an accurate picture with the intention of quantifying our operations.
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When his factory was making just five hundred yo-yo toys a day, his manufacturing costs were high, but with improved workflow design and buying bulk materials, when he began manufacturing a thousand yo-yo toys a day the process costing decreased.
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You should try and figure out what your process costing will be before you start producing a huge amount of product.
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