Managerial Accounting: Process Costing Application Presented to: Asif Muzaffar Sheikh Presented by: M.Hashaam Allama Iqbal Open University, Islamabad ASC: Punjab Computer College, Garhi shao Lahore

2. Managerial
Accounting
Topic:
Process Costing
Application
Presented to: Asif
Muzaffar Sheikh
Presented by: M.Hashaam
Roll No. : AM552381
Class : MBA (B&F) 2nd Semester

3. Acknowledgment
First of all thanks of Allah who is
most beneficent and the most
merciful whose blessings are
abundant and favors are
unlimited.
It is my pleasure to acknowledge
the guidance and support of my
subject Teacher: Mr. Asif
Muzaffar for his endless
guidance.

4. An Abstract
Process costing is adopted when
there is mass production through
a sequence of several processes,
for example; cement, chemical,
flour and glass manufacturing.
In PepsiCo. Snacks department
Costing is mainly associated with
production.

5. Process Costing
Process costing is a method of
costing under which all costs
are accumulated for each stage of
production or process, and the cost
per unit of product is ascertained at
each stage of production by dividing
the cost of each process by the
normal output of that process.

6. Characteristics of Process
Costing
 Costs are accumulated by each process
 Each process maintains its process
account
 The process account is debited with the
costs incurred and credited with goods
completed and transferred to other
process account
 When the goods are completed, they will
be transferred to finished goods account
 When the goods are sold, the amount will
be transferred to the cost of goods sold
account

7. Losses in Process Costing
 Normal loss is the loss which is
unavoidable, uncontrollable and
expected in normal conditions. It
may be inherent in the
manufacturing process: If the loss is
inevitable, i.e.; unavoidable and within
the limit, it is called normal process
loss

8. Losses in Process Costing
 Abnormal loss is controllable
and avoidable and generally
caused by abnormal or
unexpected conditions, such as
bad designing, poor materials,
accident and negligence,
inefficiency of labor etc.

9. Transactions Accounting
treatment
Accounting
entries
Normal loss Losses within
expected level
Not assigned cost
No entry
Abnormal loss Excess loss over the
expected level
Assigned cost
Dr. Abnormal
loss
Cr. Process
account
Abnormal gain Gain resulted when
the actual loss is
less than the normal
or expected loss
Dr. Process
account
Cr. Abnormal
gain

10. Transactions Accounting
treatment
Accounting
entries
Scrap value
of normal
loss
Reducing
material cost
Dr. Scrap
Cr. Process
account
Scrap value
of abnormal
loss
Reduce cost of
abnormal loss
Dr. Scrap
Cr. Abnormal
loss
Loss of
scrap value
due to
abnormal
gain
The actual units
sold as scrap will
be less than the
scrap value of
normal loss
Dr. Abnormal
gain
Cr. Scrap

11. Transaction
s
Accounting
treatment
Accounting
entries
Actual cash
received
from the
sale of
scrap
Reducing
material cost
Dr. Cash
Cr. Scrap

12. Case Study
Process Costing in
Lay’s

13. Mission
Our mission is to be the world's premier
consumer products company focused on
convenient foods and beverages. We
seek to produce financial rewards to
investors as we provide opportunities
for growth and enrichment to our
employees, our business partners and
the communities in which we operate.
And in everything we do, we strive for
honesty, fairness and integrity.

14. Vision
"PepsiCo's responsibility is to continually
improve all aspects of the world in which
we operate - environment, social,
economic - creating a better tomorrow
than today."
Our vision is put into action through
programs and a focus on environmental
stewardship, activities to benefit
society, and a commitment to build
shareholder value by making PepsiCo a
truly sustainable company.

15. Process Costing for Lay’s
Snack’s department of PepsiCo.
undertakes the process costing
system because:
 Identical units of product are being
produced for a longer period of time
on continuous basis.
 Costs are accumulated by
departments.
 Units costs are computed by
departments.

16. Lays Departments;
1. Input Department
2. Processing Department
3. Packaging Department

18. SWOT
Strengths
• Cost Advantage
• Good Will
• Advertising
Weaknesses
• High Fat’s

19. SWOT
Opportunities
• Product & Service
• Improvement
• Competitive
advantage
Threats
• Local Snack’s
• Competition

20. Conclusion
I conclude that Process costing is
type of operation costing which
used to ascertain the cost of a
product at each process or stage
of manufacturing. Lay’s process
costing is computed by
departments and have affective
procedure to ascertain the cost.

21. Recommendations
I will recommend that Lay’s have
opportunity to explore their
costing system in efficient way.
Which could help in enhancing
profitability. Cost of Production
Report should be prepaid instead
of cost sheet.

22. Thank You