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Process Costing - Essay Example

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This paper is a comparative analysis report on process costing. The paper aims to review five scholarly articles to determine that how process costing is a significant and effective cost management procedure. The objective here is to extract the comprehensive knowledge on process costing and its execution. …
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Process Costing
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Process Costing

In the contemporary period, process costing is one successfully adopted accounting methodology in organizations. Organizations use process costing for effective cost calculation, especially at times when other costing models (job costing or activity based costing) are futile and not producing desired outcomes. Process costing is applied when activities like cost accumulation, cost assignment and cost assessment are to be performed and conducted. When both cost of fixed and variable natures are to be calculated then process costing comes into organizational application.
Importance of Process Costing
When an organization involves the multi-level production process and manufactures products in departmental sequence, then cost management is really a critical task. Process costing is a methodology than enables such organizations to calculate costs in the critical times. It is one methodology that can effectively be applied in manufacturing firms and organizations. Organizations where information flow is departmental can successfully adapt the strategic approach of process costing. This elaborates the comprehensive application of process costing in processing organizations.
Literature Review
Journal Article 1: Process-Based Costing: The Best of Activity-Based Costing
Aim: Process costing is considered as a cost allocation process. It is known to be as a methodology that assigns cost to different process patterns with respect to assigning cost to process a sequence. The aim of this study is to determine that how process costing is effective in cost allocation procedure. How process costing applies in the activity of assigning costs to sub-sections of the process is answered in this study. Methodology: The study has adapted the case study format to conduct research and assessment. The case of semi conductor manufacturer is observed and analyzed in this study. The company was earlier a R&D unit which later on became a semi conductor manufacturer. This company was selected to understand process costing in a practical manner. The researcher first performed theoretical research to find out the importance of process costing manufacturing firms. Later the researcher analyzed the case of a manufacturer that produces semi conductors in batch forms. Functional activities of the selected company were analyzed to understand the practical implication of process costing(Sievanen & Tornberg, 2002). Conclusion: The study recognizes that a two-dimensional approach can be adopted on the basis of process costing methodology. These two dimensions are strategic and operational information collection. The study identifies that using the process costing with two dimensions, organization’s overall process cost can be calculated. Adopting the two dimension approach of process costing, cost of departmental procedures, functional activities and cost of objects and materials can be calculated. When departmental costs are known, cost allocation is an easy task to perform(Sievanen & Tornberg, 2002). Journal Article 2: Accounting for Process Cost Systems Aim: It has been noted that theories presented on process costing are certainly on a gap with the practical evidence that is present in this subject. There is certainly a gap present between process costing theory and practice as projected by most of the UK and Australian companies. The aim of this study is to understand this gap, which is done by means of understanding the New Zealand environment perspective(Parkinson, 2012). Research Methodology: The researcher adopted a pragmatic research design to conduct this study as both primary and secondary sources were used to perform ... Read More
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