Process costing
Introduction
What is process cost
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rocess costing is that aspect of operation costing which is used to ascertain the cost of the product at each process or stage of manufacture, where processes are carried on having one or more of the following features:
- Production is done having a continuous flow of identical products except where plant and machinery is shut down for repairs, etc.
- Clearly defined process cost centers and the accumulation of all costs (materials, labour and overheads) by the cost centers.
- The maintenance of accurate records of units and part units produced and cost incurred by each process.
- The finished product of one process becomes the raw material of the next process or operation and so on until the final product is obtained.
- Avoidable and unavoidable losses usually arise at different stages of manufacture for various reasons. Treatment of normal and abnormal losses or gains is to be studied in this method of costing.
- Sometimes goods are transferred from one process to another process not at cost price but at transfer price just to compare this with the market price and to have a check on the inefficiency and losses occurring in a particular process. Elimination of profit element from stock is to be learnt is this method of costing.
- In order to obtain accurate average costs, it is necessary to measure the production at various stages of manufacture as all the input units may not be converted into finished goods; some may be in progress. Calculation of equivalent units is to be learnt in this method of costing.
- Different products with or with out by-products are simultaneously produced at one or more stages or processes of manufacture. The valuation of by-products and apportionment of joint cost, before point of separation is an important aspect of this method of costing. In certain industries, by-products may require further processing before they can be sold. A main product of one firm may be a by-product of another firm and in certain circumstances; it may be available in the market at prices which are lower than the cost to the first mentioned firm. It is essential, therefore, that this cost be known so that advantages can be taken of these market conditions.
- Output is uniform and all units are exactly identical during one or more processes. So the cost per unit of production can be ascertained only by averaging the expenditure incurred during a particular period.
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Course Material
- Introduction, Organization and overview of the course.
- concept and classification of costs.
- Cost of goods sold, cost of good manufactured
- Cost of goods sold, cost of good manufactured
- Costing and control of material,
- Costing and control of material,
- costing and control of labour,
- costing and control of labour,
- costing and control of factory over head
- Factory Overhead Departmentalization
- product cost accumulation systems
- product cost accumulation systems
- Job order Costing
- Job order Costing
- Job order Costing
- Job order Costing
- Process costing
- Process costing
- Process costing
- Process costing
- Joint product and by product costing
- Joint product and by product costing
- Joint product and by product costing
- Joint product and by product costing
- Budgeting
- Budgeting
- Budgeting
- Budgeting
- Direct and absorption costing
- Direct and absorption costing
- Break-even analysis and cost-volume-profit analysis
- Break-even analysis and cost-volume-profit analysis
- Chapters 32
- Department Noon Business School
- Teacher
Shahid Mahmood
