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Identify two non-manufacturing companies that could use process costing and explain briefly.

Identify two non-manufacturing companies that could use process costing and explain briefly.

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Process costing is method of costing which is used in industries where material has to pass through two or more processes for being converted into finished product. In this costing method, we prepare separate account for each process and output of one process becomes input of another process and we all expenditure pertaining to that process is charged to that process account. This method of costing mainly usefu in manufacturing of products like steel, paper, medicines, rubber, chemicals, paints etc. However service companies also used such method of costing where nature of service provided is routine and recurring. Examples: ERP service company -they are having multiple process eg. Presales, implementation, support etc. So that we record expenditure each process wise. Legal service company- they are also having multiple dept/ process eg. Litigation support, legal research, legal transcription, contract management etc Note: Process costing doesnot not require to have WIP inventory.

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