Process Costing Manac Ppt

PROCESS COSTING

DR. ALOK DIXIT INDIAN INSTITUTE OF MANAGEMENT LUCKNOW

COSTING SYSTEMS USED TO DETERMINE PRODUCT COSTS

Costing Systems Process Costing

Job-order
Costing

Mass production of identical or similar products (at process-level). For example, Sugar, food, chemical industry. Many units of a single, homogeneous product flow evenly through continuous production process(s). One unit of product is indistinguishable (at process-level) from any other unit of product. Each unit average cost. of product is assigned the same

SOME EXAMPLES OF BUSINESSES USING PROCESS COSTING

Process Costing

Extraction In a process cost system,

Process costing accumulates costs by process or department and then assigns them to a large number of nearly identical products. Drilling/

SOME EXAMPLES

        

Costs are tracked through a series of connected manufacturing processes or departments; Used for large volume production of uniform products. Example:

Chemicals Oil refining Textiles Paints Paper Flour Rubber Steel Food processing Supply to Customer

http://www.bajajhindustan.com/sugarp rocess.html

Illustration 3-2

FLOW OF COST IN PROCESS COSTING SYSTEM

Process Costing
Materials Inventory Work in Process, Mixing Dept

Manufacturing Wages

Work in Process, Molding Dept

Finished Goods

Manufacturing Overhead

Work in Process, Packaging Dept

Cost of Goods Sold

IMPORTANT ASPECTS OF PROCESS COSTING
 Flow

of Costs through various processes; of Normal Loss and Abnormal

 Treatment

Loss/ Gain;

 Concept

of Equivalent Units; of Joint Costs; of By-Products;

 Allocation  Treatment

FLOW OF COSTS THROUGH VARIOUS PROCESSES
• •

Product may be produced in single process. OR In case it utilizes more than one process, output of one process become input for the subsequent process.

Example

PROCESS ACCOUNTS

TREATMENT LOSS/ GAIN

OF

NORMAL LOSS

AND

ABNORMAL

Product X