Diffrence between product costing and process costing?

Do not explain just defination........ answer should contain example

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Jitender Chhabra

  • Oct 1st, 2015

Product Costing mean sum of all cost incl. Material (Direct), Labour (Direct/Indirect), all Overheads (factory overheads, selling & distribution overheads, admin overheads etc..) which are involved to make a particular product. For Example: If we want to produce a Dining Table, then we need Wood of Rs 2,000 , Hardware of Rs. 200 , Glue of Rs. 50, Polish of Rs. 350 & Finishing Material of Rs. 100 & labour takes suppose 2 Hr & make it & we are paying 50 Rs per hr as labour rate & other overheads are 10% & 5% of Material & Labour Cost respectively i.e Rs. 275. Then the total cost will be Rs.3,075/-. On the other hand Process Cost mean computation of cost at each step of Production process, this type of costing use where production process are divided into more than 1 processes & in which material handling is involved during production of a particular product. For Example if we want to make a Dining Table & suppose there are 4 processes involved in the production of it like Wood Treatment, Wood Seasoning, Jointing & Precutting. Then the cost of Wood Treatment Process (Incl. Chemical Cost to treat wood, Labour Cost, Other overheads) is called process cost of Dining Table. In Short, Product Cost is the total cost to make or to produce the product whereas process cost is the cost of single process involved in the production of a particular product.

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Suyash Shah

  • Sep 11th, 2017

Product is an object which, in itself, is static & does not involve time as one of its dimension. On the other hand, process is continuous & essentially implies time as one of its ingredients. So, the cost of product is arrived per unit & that of process is arrived per unit time.

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