Process costing lecture. Managerial Accounting Chapter 3 Process Costing 2019-01-17
Process costing lecture Rating:
9,4/10
416
reviews
Managerial Accounting Chapter 3 Process Costing
In other words, the industrial units, which are following single production process, can apply operation-costing system instead of process costing system. Evenly through the process includes different kinds of costs but all added evenly iii. However, since manufacturing overhead consists of numerous costs some of which are not immediately available, Manufacturing Overhead is charged on an applied basis. To determine the unit cost. Costs of partially assembled units not same as fully assembled units ii. That type of advantage is diminished with the technology advances in computing. Therefore, the units of good output are often not the same as the units input.
Valuing inventory and cost of goods sold for external reporting 3. When overhead is under-applied, manufacturing costs have been understated and when overhead is over-applied overhead costs have been overstated. Product-costing systems should reflect the nature of the underlying operations C. The product, cost object, must be clearly identified before costs can be assigned. Assuming Top That uses the weighted-average method to account for inventories, the equivalent units of work for the month of February are Direct Materials Conversion Costs a. In determining the best buy, two six packs of soft drinks are the same quantity as a twelve pack but the prices might not be equivalent.
According to Harold Bieman Jr. Note that the direct material cost comes from material requisition forms and the direct labor costs from employee time tickets. In the Manufacturing Overhead Account actual costs are recorded on the debit side and applied costs are recorded on the credit side. Sometimes, abnormal gain is also available in certain processes. Features of Process Costing The process costing has the following features. Therefore, the costs are calculated as cost of goods processed and sent to the next process or as finished goods and sent to store room or as ending work in progress.
Process Costing video lecture by Prof P.K.J. Mohapatra of IIT Kharagpur
Whichever method is selected, the persons using the information must also understand what the information means. Knowing the number of units is critical—step one of the five steps. In a manufacturing environment, costs are accumulated on a Job Cost Sheet Exhibit 3-4, Page 95. For example, liquids evaporate or solids are filtered out. Process costing: process forms basis of costing system B.
Process costing Introduction, with losses, closing work
Only homogeneous products are produced. If physical inventory levels of work in process are large in relation to the total number of units transferred out 2. In step 3 of the five key steps, the costs are identified as either beginning work-in-process inventory costs or costs added during the current period. Standard costing applicable to process costing 1. It is also useful in situations where companies manufacture such a broad mix of products that they have difficulty accurately assigning actual costs to each type of product; under the other process costing methodologies, which both use actual costs, there is a strong chance that costs for different products will become mixed together.
Process costing — with losses Many processes incur losses which are inevitable. Weighted average merges unit costs from different periods making comparisons difficult c. Under this concept, costs are accumulated over a fixed period of time, summarized, and then to all of the units produced during that period of time on a consistent basis. How many are left in process at the end of the period? To calculate the cost of main product accurately. A main product of one firm may be a by-product of another firm. The accounting system supporting the manufacturing operation must be designed in a way that captures the underlying process.
Describe the five steps in process costing 3. A process-costing system will typically use a work-in-process account for each process or department , whereas a job-costing system would use one work-in-process account for each job being produced. The widgets then move to the trimming department for further work, and these per-unit costs will be carried along with the widgets into that department, where additional costs will be added. All the input units cannot be converted into finished products in all the processes for a specified period. Process costing is used for operations in which many identical or similar units are produced. If direct materials or conversion costs per unit vary significantly from period to period b.
Process Costing video lecture by Prof P.K.J. Mohapatra of IIT Kharagpur
Costs will have gone into both completed units and the work-in-progress and therefore have to be averaged over all of those units. To account for partially completed units, the concept of equivalent units is used. The accurate accounting records are maintained in process wise as the number of units produced completely, the number of units partly produced and total costs incurred. To allocate the accumulated materials, labour and factory overhead costs to process cost centers. Main difference is one Work-in-Process account for each process rather than each job 5. Likewise, the cost of finished product is calculated by dividing the total production cost into the number of units produced.
