A process costing system is used by companies that produce similar or identical units of product.

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A process costing system is specifically designed for companies that produce large quantities of similar products using a continuous production process. This type of system is ideal for industries like chemicals, textiles, and food processing, where the production process involves multiple stages and large volumes of raw materials, labor, and overhead costs. The main objective of process costing is to allocate these costs to individual units of production based on their average cost per unit. This is accomplished by dividing the total cost of production by the number of units produced during a certain period.

A Process Costing System Is Used by Companies That Produce