INTER-PROCESS PROFITS

In some process industries the output of one process is transferred to the next process not at
cost but at market value or cost plus a percentage of profit. The difference between cost and
the transfer price is known as inter-process profits. The advantages and disadvantages of
using inter-process profit, in the case of process type industries are as follows :
Advantages :
1. Comparison between the cost of output and its market price at the stage of completion is
facilitated.
2. Each process is made to stand by itself as to the profitability.
Disadvantages :
1. The use of inter-process profits involves complication.
2. The system shows profits which are not realised because of stock not sold out.