Use Of Process Costing In Large Industry

Process costing is an accounting methodology that tracks and accumulates the direct costs and allocates the indirect costs of a manufacturing process. This method allocates costs to production units in companies producing large quantities of homogeneous products. Process costing is suitable for manufacturers that produce similar products and where production is continuous.

It seems logical and rational for the Fossil Groups industry to use the costing process because this method is ideal for large enterprises that produce similar products. According to the United States Securities and Exchange Commission (2022), the Fossil Group industry produce many accessories, such as watches, belts and clothes. Each category has its own brands, so their use of the costing process looks logical and functional since it would greatly facilitate the calculations. In addition, another advantage of the costing process is that it greatly simplifies the tracking of the cost of producing specific types of goods. The costing process is the most effective option when many goods are produced, divided into categories but with slight differences, such as watches, bags, and belts. Then it is easier to calculate the process cost of similar products with modest variations in each and their similar materials and production systems.

Information technology, in turn, is further inclining production to use the costing process. The introduction of automated systems is a more logical step in producing similar groups of goods and, accordingly, simplifies the cost calculation. With the use of information technology for the costing process, it is much easier to carry out calculations in an automatic mode because all raw materials and product manufacturing differ slightly. Due to all these reasons, job costing is much less suitable for the Fossil Group industry.


United States Securities and Exchange Commission. (2022). Form 10-K of Fossil group inc. Web.