What is process costing primarily used for?

Process costing is primarily used for homogeneous products that are produced in a continuous manner. This method is ideal for industries where goods are undifferentiated and produced in large quantities, such as in chemical manufacturing, oil refining, and food production. In these environments, costs are accumulated over a specific period and then averaged over all units produced, allowing for a simplified method of costing.

This approach allows managers to understand the cost of production on a per-unit basis without the need for tracking individual items, as the products are generally indistinguishable from one another. Consequently, process costing is effective in providing the necessary information to gauge profitability, control costs, and set pricing strategies for these types of products. The focus on continuous production aligns with the characteristics of process costing, distinguishing it from other costing methods that may cater to more heterogeneous or unique product lines.