Process Costing System
Process costing system is a system in which costs are assigned to a mass of homogeneous product. Process costing system includes manufacturing direct & indirect cost. Process costing system is mostly used in industries.
Learning Objective: Prepare the format of cost of production report. Calculate equivalent units of production. What is the treatment of normal and abnormal loss in process costing system? How the timing of normal and abnormal loss is considered in a cost of production report?
General Questions and Answers about Process Costing System: Questions: What is the primary objective in process costing? See answer Job order and process costing procedures are used by different types of industries. Discuss the procedure appropriate for each type. See answer For the following
Product Flow in Process Costing System: A product can flow through a factory in numerous ways. Three product flow formats associated with process costing – sequential, parallel, and selective – are illustrated here to indicate that basically the same costing procedures can be applied
Process Costing System – Case Study: Case A. Accounting for Spoiled Units: The House Hold Aids Company assembles clip clothespins in three sections, and uses process costing. Under normal operating conditions, each section has a spoilage rate of 2%. However, spoilage can go as
Process Costing System Addition of Materials, Average and FIFO Costing After studying this chapter you should be able to: In numerous industries, all materials needed for the product are put in process in the first department. However, additional materials might be required in subsequent
Process Costing System: After studying this chapter you should be able to: Define and explain process costing. Explain the uses of process costing system. Explain the advantages and disadvantages of Process Costing System? Definition and explanation of process costing system: Cost accumulation procedures used
Procedures for Materials, Labor, and Factory Overhead Costs Accumulations: In process costing, materials, labor, and factory overhead costs are accumulated in the usual accounts, using normal cost accounting procedures. Costs are then analyzed by departments or processes and charged to departments by appropriate journal
Operation Costing System or Hybrid Costing System: Learning Objectives of this article: What is operation costing or hybrid costing system. Explain with examples. Definition: Operation costing is a hybrid costing system that employs aspects of both job order and process costing. Explanation and Uses
Discussion Questions and Answers: Learning Objectives: Find answers of the general questions about Fist in First Out and Average Method of process costing system. Questions: How does the FIFO method differ from the average costing method of process costing system? See answer. Why are
Difficulties Encountered in Process Costing Procedures: Learning objectives of this article: What are the difficulties or Limitations in a process costing procedure? Certain difficulties likely to be encountered in actual practice should be mentioned with regard to process cost accounting procedures: The determination of
Costing By Departments: The nature of manufacturing operations in firms using process or job order cost procedures is usually such that work on product takes place in several departments. With either procedure, departmentalization of materials, labor, and factory overhead costs facilitates application of responsibility
Costing By Departments: The nature of manufacturing operations in firms using process or job order cost procedures is usually such that work on product takes place in several departments. With either procedure, departmentalization of materials, labor, and factory overhead costs facilitates application of responsibility
Beginning Work in Process Inventories Average Costing Method: When beginning work in process inventory costs are merged with costs of the new period, the problem is essentially one of securing representative average costs. Ordinarily, the averaging process is quite simple. Example: The Clonex Corporation
Beginning Work in Process Inventories First In First Out (FIFO) Costing Method: It is possible to keep beginning work in process inventory costs separate rather than average them in with the additional new costs incurred in the next period. This procedure gives separate unit
Cost of Production Report (CPR): Definition and Explanation of Cost of Production Report (CPR): A departmental cost of production report (CPR) shows all costs chargeable to a department. It is not only the source for summary journal entries at the end of the month
Cost Flow and Journal Entries–Process Costing System: Materials: Materials are drawn from the storeroom using a material requisition form. Materials can be added in any department, although it is not unusual for materials to be added only in the first department, with subsequent department
Characteristics and Procedure of Process Costing System: The characteristics of process costing system: A cost of production report is used to collect, summarize and compute total and unit costs. Production is accumulated and reported by departments. Costs are posted to departmental work in process
Equivalent Units of Production: Definition and Explanation of Equivalent Units of Production: After materials, labor and overhead costs have been accumulated in a department, the department’s output must be determined so that unit cost can be computed. A department usually has some partially completed