FACULTY OF BUSINESS

PROFESSIONAL SCHOOL OF ACCOUNTING

REORGANIZATION OF COMPANIES

AUTHOR(S):

Olivares Rosales, Maria Alexandra (orcid.org/0000-0003-1108-6436)

ADVISER:

Aguilar Salinas Rafael Jacobo

LINE OF RESEARCH:

FINANCE

NEW CHIMBOTE – PERU

2023

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 INDEX

COVER 1
TABLE OF CONTENTS 2
I. INTRODUCTION 3
II. DEVELOPMENT 4
2.1 Concept 4
2.2 Features 4
2.3 Purposes 5
2.4 Goals 5
2.5 Advantages 5
III. CONCLUSIONS 6
IV. REFERENCES 7

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 I. INTRODUCTION

Process cost is another method of tracking the costs of manufactured items.

After the products are completed, their overhead costs are marked up and
they are sold at a profit to customers.
Process costing is a method of collecting and assigning manufacturing
costs to units produced in the manufacturing industry. This system
accumulates costs at the aggregate level for a large batch of products and
then allocates them to individual units produced. It is a system of
accumulation of production costs by departments or cost centers. The costs
of the products are determined by periods of time, during which the raw
material undergoes a process of continuous transformation. This system is
used in companies for the massive and continuous production of similar
articles . 

For example, how would you determine the precise cost required to create
one gallon of jet fuel, when thousands of gallons of the same fuel leave a
refinery every hour? The cost accounting methodology used for this
scenario is the process cost system.

This cost system is the only reasonable approach to determining product

costs in many industries. Use most of the journal entries found in a cost-
per-job environment. Therefore, it is not necessary to restructure the chart
of accounts to a significant degree.

This makes it easy to switch to a job costing system from a process costing
system if the need arises, or to adopt a hybrid approach that uses
components from both systems.

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 II. DEVELOPMENT

2.1 Concept

A process cost system accumulates costs when a large number of identical

units are produced. In this situation, it is more efficient to accumulate costs
at the aggregate level for a large batch of products and then allocate them
to the individual units produced.

It is based on the assumption that the cost of each unit is the same as every
other unit produced, so there is no need to track information on an
individual unit .

2.2 Characteristics

 It is applied in companies where production is continuous, uniform and

rigid.

 The production current is continuous.

 The transformation of the articles is carried out through the different

processes that comprise the system.

 Costs are accumulated and recorded by department or productive cost

center.

 Each department has its own work-in-process account in the general

ledger.

2.3 Types of companies that use costs per process

The cost system by processes is used mainly by companies that

produce goods in mass and continuously, such as the textile industry,
chemical processes, plastics, cement, steel, sugar, oil, glass and mining,
among others .

 Coca-Cola bottling plant

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  Companies that manufacture bricks
 Cereal processing companies
 Companies that make computer chips
 wood manufacturing company

2.4 Goals

 Collect the costs of services or products.

 Control operations and determine the prices of products.
 Display the financial statements.
 Calculate, in a certain time, the production costs of a particular
process that can be carried out in one or several production
departments.

2.5 Advantages

 It is simple and less expensive to find out the cost of each process.
 Processing expense is easy to allocate so you can have accurate
costs.
 The production activity is standardized and the products are
homogeneous.
 It is possible to periodically determine the costs of the process in
short periods.
 Processing is administratively cheaper and requires less investment
in time and technical capacity of personnel

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 III. CONCLUSIONS

A cost system by processes is viable since it responds to the needs of the

companies, allowing the correct control and management of costs and real
and detailed information. This system is applied in companies where the
production requires sequential steps for its completion and the finished
product is more or less uniform or similar. The application of this system
allows to increase the profits of the company, applying to each product a
reasonable sale price and according to the real costs generated in the
productive process .

Regarding the specific conclusions of the process cost system, a study

concludes that this system is suitable for companies where production must
be carried out in sequential steps for its completion and the finished product
is more or less uniform or similar.

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IV. REFERENCES

Alonso Sánchez, F., Ayuso Huertas, J. and Martínez Pages, S. (1997):

Systems Costs Process

Process cost system: what it is, characteristics, examples (lifeder.com)

EDIGRABER SAC (2018): Types of companies that exercise.Lima

What type of companies use the system of costs by processes? - centrobanamex.com.mx