Process Costing
Process costing is an accounting methodology used to assign production costs to units of output in industries where products are manufactured through continuous or repetitive processes, such as chemicals, food processing, or oil refining. It accumulates costs for each production process or department over a period and then allocates them evenly to all units produced during that period, based on equivalent units of production. This method is ideal for homogeneous products where individual units are indistinguishable and costs are incurred uniformly across large batches.
Developers should learn process costing when working on software for manufacturing, supply chain management, or enterprise resource planning (ERP) systems, as it helps in building accurate cost-tracking and financial reporting features. It is particularly useful in industries with mass production, where understanding per-unit costs is critical for pricing, budgeting, and profitability analysis. Knowledge of this methodology enables developers to design systems that automate cost allocation, integrate with inventory management, and support compliance with accounting standards like GAAP or IFRS.