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Definition: Process Costing is in cost accounting a method for collecting and assigning manufacturing costs to the units produced. Processing cost is used when identical or nearly identical units are mass produced, where the costs associated with individual units of output need not be differentiated from each other. The cost of each product produced is assumed to be the same as the cost of every other product.
Producing the products may require several processing operations, which are being added to the cost of the products.
See also Activity Based Costing, Job Order Costing.