Process costing is a method used in manufacturing to allocate costs to products that are produced in a continuous flow. This approach is ideal for industries where products are indistinguishable from one another, such as in the production of chemicals, food, or textiles. Costs are averaged over all units produced during a specific period, making it easier to determine the cost per unit. In process costing, costs are categorized into direct materials, direct labor, and overhead. Each department or process in the production line tracks its costs separately, and at the end of the period, these costs are summed up to calculate the total cost of production. This helps businesses understand their expenses and set appropriate pricing strategies.