# Process Costing

Pages: 3 (820 words) Published: January 4, 2011
Process costing
Process costing is a system which mostly practices by a company whereby the manager of the company wants to know the cash flow from one department to another. Process costing give a clarify information to managers, therefore this activities is very important. Process costing is consisting of three ingredients which are direct materials, direct labor and manufacturing overhead. Direct material is the raw material which needs to produce a product, for example rubber for shoes, plastics for straws and etc. direct labor is a person who work and complete the product before it is completely produce. And manufacturing over head is about the indirect materials, indirect labor, and some indirect related to the factory. For example the flow of process costing structure in GPK

Assignment for manufacturing cost
It is Accumulation of materials, direct labor and overhead cost is easy to be learned. We just need to understand if there is something added inside that department, we must debit it, on the other hand, if there is something subtracted inside that department, we must credit it. For example: purchase direct material; debit direct material account and credit cash account, increasing labor force; debit direct labor and etc. 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 the unit cost can be computed. A department usually has some partially completed units in its ending inventory. It does not make any sense if we count these partially completely units as equivalent to fully completed units when counting the department’s output. There are some mathematically formulation for us to calculate the equivalent units. There are: - (Equivalent Units = Number of partially Completed Units * Percentage of Completion) Why is so important about equivalent units? It is because it determined the cost per unit of production and Measures the work...