Abstract The article presents information on the development of stochastic process costing models in accounting. In a deterministic production system, all units would pass in a common sequence through the processes and exit the system as final product. However, many mass production systems cannot be classified as deterministic. The process costing models developed in this article are based on the premise that product flows within a mass production system can be described stochastically. Time is handled in two ways resulting in two models. Standard costs is integrated into the models for the purpose of costing output and inventories. The costing phase of the model has only been designed for a single entry system. In a multiple entry system, different transfer and output costs would be required for each entry point. Output and inventories would be coasted based on the expected entry point. The possibility of non-sequential transfers is another condition that would complicate the allocation of costs. Non-sequential transfers will be considered in a later section of this paper.

Abstract The article discusses how in-process inventories could be incorporated into a quantitative planning model for multiproduct production systems, in reference to an article written by Gerald A. Feltham in the January 1970 issue of the periodical "The Accounting Review." By determining first a standard transfer cost, costing of inventories is facilitated. The article explains that the standard transfer cost i is equal to the standard cost of all resources required preceding a unit of activity in process i. It is possible to employ standard costs in costing the in-process inventories of the production system.