Process costing is an accounting method that tracks direct costs for labor, raw materials, and overhead through various stages of manufacturing, allowing businesses to manage expenses effectively.
Businesses can implement process costing by monitoring costs through stages of customer acquisition and order fulfillment, thus gaining insights into profit margins and pricing strategies.
Process costing enables small businesses to control inventory, identify inefficiencies, and prepare precise financial statements which are essential for maintaining competitiveness and sustainability.
Unlike job costing, which is ideal for customized orders, process costing works best for industries where products are homogeneous and produced continuously, ensuring accurate cost tracking.
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