What is process costing primarily used for?

Process costing is primarily used in industries where production is continuous and products are indistinguishable from one another, such as in manufacturing processes like chemicals, textiles, or food processing. This method of costing helps organizations effectively summarize and measure the total costs associated with production over a specific period.

Under process costing, costs are accumulated for a specific time frame, and these costs are then averaged over the total number of units produced, giving a per-unit cost. This is particularly useful in environments where the production process is continuous, meaning that products are produced in large batches rather than as individual items. By focusing on the total production costs over a given period, process costing aids businesses in managing expenses, setting prices, and assessing profitability.

While measuring individual project costs is more characteristic of job order costing, and calculating the break-even point and allocating overhead costs to product lines involve different accounting methodologies or decisions, process costing stands out for its utility in summarizing and analyzing costs in a continuous production environment.