The following are principles of process costing

  • The majority of items of cost can ordinarily be identified with specific processes and collected and accumulated separately for each period.
  • Production records of each process are so designed as would show the quantum of production for each period.
  • The total cost of each process is divided by the total production by the process for arriving at the unit cost of the article processed.
  • The cost of any normal spoilage or wastage is included in the cost of the total units produced. Thereby the average cost per unit is increased.
  • As the product travels from one process to another, the cumulative cost thereof in respect of the processes it has already undergone is transferred to the account of the process it has yet to undergo.

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