Process costing讲义PPT.ppt

Process Costing ;Introduction;Describe the characteristics of process costing ;Process costing aims at determining the cost of each operation /process and applying the costs accumulated at the end of each process to the products. The total cost of a product is that total cost of all the process through which the product passes divided by the number of products produced. ;5. Any work in process ( incomplete work) at the end of the period, in any of the processes, is treated as “ equivalent finished goods”. 6. The cost of one process is transferred and added to the cost of the next process, because the output of one process (except the final process) is treated as the input of the next process. ;7. There are clearly defined procedures for division of costs amongst the joint products and the by-products emerging from a process. ;Answer;Describe the situations where the use of process costing would be appropriate. ;Example: A sugar producing industry, a refinery and milk products processing industries manufacture identical units. ;4. It is difficult to establish the identity of individual jobs as opposed to the entire production. Example: In the sugar industry, sugar is produced continuously and therefore you cannot calculate the cost per quintal ( or tonne or kilogram) of sugar based on the orders received. The cost needs to be computed by accumulating the costs of all the processes and dividing the costs by the total quantity of the output produced. ;The features of process costing given above specify that the process losses incurred for normal loss are borne by the good units. In a continuous production system it is very likely that some amount of materials or semi-processed materials will be wasted in the process.;Certain production processes are such that some losses are inherent to the production process. These losses are incurred under the normal conditions. Normal process loss represents the loss, which is expected under normal conditions. Normal loss is un