Process Costing

What’s it all about?

Techniques used for products made in continuous processes to work out the cost of making the product and for any partially completed work.



baked beans






Process Examples.

Note that with processes you can’t see any particular piece of the input in any particular piece of output, the process is continuous, ratios of ingredients lead to specific outputs (and losses).

Some guff from the company promoting themselves, but the important thing for us is teh example of a process.

Practice questions.


This example from PQ magazine (worth subscribing to – free – if you are interested in working in the accounting field) summarises Process Costing.

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Introducing Process Costing

Normal Losses

Dealing with Abnormal Losses.

Dealing with Abnormal Gains

Process Costing where there is more than one step in the process.

Joint Products and By-Products

Process Costing where there is further processing of the output (another process for part of the production).


Dealing with Work in Progress (Work in Process).

Possible Written Questions.

(No indication of marks – the more marks a question gets, the more you are expected to write – detail that is, not just words!) If you can’t answer these, you need to do some more reading. I do ‘find’ questions elsewhere, so these aren’t all questions I have used myself.

Discuss the conditions under which process costing is most appropriate,

Explain the difference between joint products and by products and discuss 2 bases upon which common process costs can be split between joint products.