sachin kumar sharma, profile picture
Uploaded bysachin kumar sharma
PPT, PDF639 views

Process costing manipal jaipur bba 3 semester

Here are the steps to prepare the Process 1 account using FIFO method considering the losses: 1. Calculate equivalent units (EUP) - Opening WIP: 1000 units (60% complete) = 600 EUP - Production: 20000 units - Closing WIP: 3000 units (20% complete) = 600 EUP - Total EUP = 21000 units 2. Calculate costs: - Opening WIP costs: Materials $6000, Conversion $1200 = $7200 - Current period costs: Materials $30000, Conversion $52200 = $82200 - Total costs = $82200 + $7200 = $89400 3. Calculate cost per EUP:

Embed presentation

Downloaded 47 times
1 Process Costing
2 Process costing Process costing is adopted when there is mass production through a sequence of several processes Example include chemical, flour and glass manufacturing It computes the average cost per unit by dividing the costs or production for a particular period by the number of units produced during the period
3 Process 1 Process 2 Process 3 Direct material Direct labour overheads Finished goods Cost of goods sold Direct material Direct labour overheads Direct material Direct labour overheads
4 Accounting for 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
5 Process A Material 500 Labour 100 Overhead200 Process B 800 800 800 Process B Process A800 Material 50 Labour 150 Overhead100 Process C 1100 1100 1100 Process C Process B 1100 Material 80 Labour 110 Overhead 210 Finished Gds 1500 1500 1500 Finished Goods Process C 1500 Cost of GDs Sold 1300 Bal c/d 200 1500 1500
6 Accounting for losses and scrap in process account
7 Accounting for losses in process costing In a production process, losses are inherent and unavoidable Nature of losses Normal loss Abnormal loss
8 Accounting for scrap Damaged goods may be sold as scrap Revenue arising from the scrap should be treated as a reduction in cost rather than an increase in sales revenue
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 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 Dr. Abnormal gain Cr. Scrap
11 Transactions Accounting treatment Accounting entries Actual cash received from the sale of scrap Reducing material cost Dr. Cash Cr. Scrap
12 Example
13 Joyce Ltd. operates a factory involving two production Processes. The output of process 1 is transferred to process 2. The information of production for January 2005 is as follows: Cost for Process 1 Materials: 3000 units at $5 per unit Labour $2400 Cost for Process 2 Materials: 2000 unit at $8 per unit Labour $1680 No opening and closing work in progress Output for January 2005 Process 1: 2300 units Process 2 4000 units
14 General overhead, for January 2005 amounted to $7140, are absorbed into the process cost at a rate of 375% of direct labour costs in process 1 and 496.4% of direct labour cost in process 2. The normal output of process 1 and process 2 is 80% and 90% of input respectively Waste matters from process 1 and sold for $4 per unit and those from process 2 for $6 per unit Required: a) Process 1 b) Process 2 c) Scrap d) Abnormal loss e) Abnormal gain
15 Process 1 account Units $ Units $ Labour 2400 Materials 3000 15000 ($5 *3000) Overhead 9000 (2400*375%) Process 2 ($10*2300) 2300 23000 Abnormal loss ($10 *100) 100 1000 3000 264000 3000 26400 Scrap: normal loss (4*600) 600 2400 Cost per unit = Total expected cost Total expected output = $26400-$2400 3000-600 = $10 per unit
16 Process 2 account Units $ Units $ Labour 1680 Materials 2000 16000 Overhead 8340 (1680*469.4%) Finished goods ($12*4000) 4000 48000 Abnormal gain ($12 *130) 130 1560 4300 49020 Scrap: normal loss ($6*430) 430 2580 Cost per unit = = $49020-$2580 4300-430 = $12 per unit Process 1 2300 23000 4430 50580 4430 50580
17 Abnormal loss account Units $ Units $ Process 1 100 1000 Scrap 100 400 Profit and loss 600 100 1000 100 1000 Abnormal Gain account Units $ Units $ Process 2 130 1560Scrap: value of abnormal gain 130 780 Profit and loss 780 100 1000 100 1000 Loss on scrap value due to abnormal gain
18 Scrap account Units $ Units $ Normal loss 430 2580 (Process 2) Normal loss 600 2400 (Process 1) Abnormal loss 100 400 (Process 1) (100*$4) Cash –process 1 (600+100)*$4 700 2800 1130 5380 1130 5380 Abnormal gain (Process 2) 130 780 (130*$6) Cash – process 2 (430-130)*$6 300 1800
19 Wk 2: Determining the output and loss: Process 2 Input (2300+2000) 4300 units Less: normal loss (10%) Expected output Actual output 4000 units 430 units 3870 units Abnormal gain 130 units Wk 1: Determining the output and loss: Process 1 Input 3000 units Less: normal loss (20%) Expected output Actual output 2300 units 600 units 2400 units Abnormal loss 100 units Back 1 Back 2
20 Equivalent units of production
21 Equivalent units of production If there is no opening or closing work in progress (WIP) the unit cost of products can be obtained as follows Unit Cost = Sum of production costs Production quantity
22 However, If there is opening or closing work in progress, the partly completed production will have a lower cost than the fully completed production We have to converted the work in progress into finished equivalent units of production (EUP)
23 Example
24 The total production cost for January 2005 was $40000. 8000 units had been completed and 4000 units wee 50% complete. Equivalent units of production 8000 units completed 8000 4000 units were 50% completed 2000 10000 Finished goods = Closing work in progress = $40000/10000 * 8000 = $32000 $40000/10000*2000 = $8000
25 Three categories in determining the equivalent units of production Opening work in progress Started and completed units Closing work in progress
26 Opening work in progress (OWIP) These units were started in the previous period and are to be completed in the current period 1/3 EUP completed In previous period 2/3 EUP completed in current period
27 Started and completed units (SACU) These units are started and completed in the current period 1 EUP completed in current period
28 Closing Work in progress (CWIP) These units are started in the current period and are to be completed in the coming period 1/3 EUP completed in current period Incomplete part
29 First in First out Weighted average cost Two methods of cost flows in process costing
30 First-in-first-out method Weighted average method The opening work in progress is the first group of units to be processed and completed during the current period The opening work in progress is merged with the production of the current period to form one batch of production It separates the cost computations of the opening work in progress and the current period production The average cost per unit of the opening work in progress and the current period production is the same
31 First-in-first-out method Weighted average method The EUP computation ignores the work performed on the opening work in progress during the prior period The EUP computation includes all work performed on the opening work in progress during the prior period Cost per unit = Current cost EUP Cost per unit = Cost of OWIP + Current Cost EUP
32 FIFO Method WAVCO Method 10 units of OWIP (60% completed in previous Period) 70 SACU 40 units of CWIP (20% completed) 4 EUP 70 EUP 8 EUP + + 82 EUP 10 units of OWIP (60% completed in previous Period) 70 SACU 40 units of CWIP (20% completed) 10 EUP 70 EUP 8 EUP + + 88 EUP
33 Example
34 Lucky Ltd. makes toys in a one-department production process. The following information is available related to the production in February 2005. Opening work in progress: 1000 units Degree of completion Cost % $ Direct materials 100 6000 Conversion (labour + overhead) 60 1200 February production: 20000 units $ Direct materials 30000 Conversion 52200 82200 7200 Closing work in progress: 3000 units (20% as complete as to conversion
35 You are required to : Prepare Process 1 account using (a)The FIFO method of valuation; and (b)The weighted average method of valuation
36 First in First out
37 Wk 1: Number of Equivalent units (EU) Total Materials Conversion Units EU EU Opening work in progress Other completed units Total completed units Closing work in progress 1000 0 400 (40%) 17000 17000 17000 18000 17000 17400 3000 3000 600 (20%) 21000 20000 18000 Wk 2: Costs Total Materials Conversion $ $ $ Costs incurred in the period Costs per equivalent units 82200 30000 52200 4.4 1.5 2.9 20000-3000 No opening WIP
38 Wk 3: Cost of units transferred to finished goods and closing WIP Total Materials Conversion $ $ $ Opening WIP Cost to complete 1000 units completed 17000 units completed Transfer to finished goods Closing WIP 7200 6000 1200 1160 1160 8360 6000 2360 74800 25500 49300 83160 31500 51660 6240 4500 1740 89400 36000 53400 Wk:4 Conversion: $2.9*400= 1160 (Wk 4) Wk 5: Materials: 17000*$1.5 = $25500 Conversion: 17000*$2.9 = $49300 Wk 6: Materials: 3000*$1.5 = $4500 Conversion: 600*$2.9 = $1740 (Wk 5) (Wk 6)
39 Process account Units $ Units $ Opening WIP 1000 7200 Materials 20000 30000 Conversion 52200 Finished goods 18000 83160 Closing WIP 3000 6240 21000 89400 21000 89400
40 Weighted average cost method
41 Wk 1: Number of Equivalent units (EU) Total Materials Conversion Units EU EU Opening work in progress Other completed units Total completed units Closing work in progress 1000 1000 1000 17000 17000 17000 18000 18000 18000 21000 21000 18600 Wk 2: Costs Total Materials Conversion $ $ $ Opening WIP Costs incurred in the period Costs per equivalent units 82200 30000 52200 4.5853 1.7143 2.871 20000-3000 3000 3000 600 (20%) 7200 6000 1200 89400 36000 53400
42 Wk 3: Cost of units transferred to finished goods and closing WIP Total Materials Conversion $ $ $ Transfer to finished goods Closing WIP 82535 30587 51678 6865 5143 1722 89400 35730 53400 (Wk 4) Wk 4: Materials: 18000*$1.7143 = $30587 Conversion: 17000*$2.8710 = $51678 Wk 5: Materials: 3000*$1.7143 = $51678 Conversion: 600*$2.8710 = $1722 (Wk 5)
43 Process account Units $ Units $ Opening WIP 1000 7200 Materials 20000 30000 Conversion 52200 Finished goods 18000 82535 Closing WIP 3000 6865 21000 89400 21000 89400
44 Lost units in process costing
45 Nature of losses Normal loss Abnormal loss
46 Normal loss Normal loss are the losses within the expectation during the production Reasons: Low quality materials and workers are engaged There may be an inherent problem in production process
47 Abnormal loss The lost units that is out of expectation
48 Continuous loss Continuous losses occur evenly throughout the production process For example, the weight loss in making mild powder
49 Discrete loss Discrete losses occur at the specific point A firm will not be aware of discrete losses unless the products are inspected at the inspection point For example, wrong buttons on a garment and wrong colour of toy cars m
50 Types and natures EUP calculation Continuous normal loss Excluding the lost units Continuous and abnormal loss Including the lost units Discrete and normal loss Including the lost units Discrete and abnormal loss Including the lost units
51 Types and natures Treatments for losses and costs Continuous normal loss Losses are included as product costs Costs are not assigned to the lost units Continuous and abnormal loss Losses are charged as period cost Costs are assigned to the lost units Abnormal loss will be written off to the profit and loss
52 Types and natures Treatments for losses and costs Discrete and normal loss Loss are included as product cost Cost are assigned to lost units Determining the point of work in progress: 1. Before passing inspection point, cost of lost units are only assigned to units transferred 2. After passing inspection point, cost of lost units are allocated between units
53 Types and natures Treatments for losses and costs Discrete and abnormal loss Loss are charged as period cost Cost are assigned to lost units Abnormal losses will be written off to the profit and loss account
54 Example
55 Lucky Ltd. makes toys in a one-department production process. The following information is available related to the production in February 2005. Opening work in progress: 1000 units Degree of completion Cost % $ Direct materials 100 6000 Conversion (labour + overhead) 60 1200 February production: 20000 units $ Direct materials 30000 Conversion 52200 82200 7200 Closing work in progress: 3000 units (20% as complete as to conversion
56 Loss: 2000 units ou are required to : repare Process 1 account using the FIFO method: ase 1: Continuous normal loss ase 2: Discrete normal loss ase 3: Abnormal loss (both continuous and discrete loss)
57 Case 1: Continuous normal loss
58 Wk 1: Number of Equivalent units (EU) Total Materials Conversion Units EU EU Opening work in progress Other completed units Total completed units Normal loss 2000 Closing work in progress 1000 0 400 (40%) 15000 15000 15000 16000 15000 15400 3000 3000 600 (20%) 21000 18000 16000 Wk 2: Costs Total Materials Conversion $ $ $ Costs incurred in the period Costs per equivalent units 82200 30000 52200 4.9292 1.6667 3.2625 20000-3000-2000 No opening WIP
59 Wk 3: Cost of units transferred to finished goods and closing WIP Total Materials Conversion $ $ $ Opening WIP Cost to complete 1000 units completed 15000 units completed Transfer to finished goods Closing WIP 7200 6000 1200 1305 1305 8505 6000 2505 73938 25000.5 48937.5 82443 31000.5 51442.5 6957 5000 1957 89400 36000.5 53399.5 Wk:4 Conversion: $3.2625*400= 1305 (Wk 4) Wk 5: Materials: 15000*$1.6667 = $25000.5 Conversion: 15000*$3.2625 = $48937.5 Wk 6: Materials: 3000*$1.6667 = $5000 Conversion: 600*$3.2625 = $1957 (Wk 5) (Wk 6)
60 Process account Units $ Units $ Opening WIP 1000 7200 Materials 20000 30000 Conversion 52200 Finished goods 16000 82443 Closing WIP 3000 6957 21000 89400 21000 89400 Normal loss 2000
61 Case 2: Discrete normal loss It is assumed that the inspection point is set at 100% completion, all work has been performed. As a result, the costs of lost units are assigned to the units transferred Material added Closing WIP (20%) Inspection point (100%)
62 Wk 1: Number of Equivalent units (EU) Total Materials Conversion Units EU EU Opening work in progress Other completed units Total completed units Normal loss 2000 2000 2000 Closing work in progress 1000 0 400 (40%) 15000 15000 15000 16000 15000 15400 3000 3000 600 (20%) 21000 20000 18000 Wk 2: Costs Total Materials Conversion $ $ $ Costs incurred in the period Costs per equivalent units 82200 30000 52200 4.4 1.5 2.9 20000-3000-2000 No opening WIP
63 Wk 3: Cost of units transferred to finished goods and closing WIP Total Materials Conversion $ $ $ Opening WIP Cost to complete 1000 units completed 15000 units completed Transfer to finished goods Closing WIP Normal loss 7200 6000 1200 1160 1160 8360 6000 2360 66000 22500 43500 74360 28500 45860 6240 4500 1740 89400 36000 53400 Wk:4 Conversion: $2.9*400= 1160 (Wk 4) Wk 5: Materials: 15000*$1.5 = $22500 Conversion: 15000*$2.9 = $43500 Wk 6: Materials: 3000*$1.5= $4500 Conversion: 600*$2.9 = $1740 (Wk 5) (Wk 6) 8800 3000 5800
64 Process account Units $ Units $ Opening WIP 1000 7200 Materials 20000 30000 Conversion 52200 Finished goods 16000 74360 Closing WIP 3000 6240 21000 89400 21000 89400 Normal loss 2000 8800
65 Case 3: Abnormal loss (both continuous and discrete) For the discrete losses, it is assumed that the inspection point is set at 100% completion
66 Wk 1: Number of Equivalent units (EU) Total Materials Conversion Units EU EU Opening work in progress Other completed units Total completed units Normal loss 2000 2000 2000 Closing work in progress 1000 0 400 (40%) 15000 15000 15000 16000 15000 15400 3000 3000 600 (20%) 21000 20000 18000 Wk 2: Costs Total Materials Conversion $ $ $ Costs incurred in the period Costs per equivalent units 82200 30000 52200 4.4 1.5 2.9 20000-3000-2000 No opening WIP
67 Wk 3: Cost of units transferred to finished goods and closing WIP Total Materials Conversion $ $ $ Opening WIP Cost to complete 1000 units completed 15000 units completed Transfer to finished goods Closing WIP Abnormal Normal loss 7200 6000 1200 1160 1160 8360 6000 2360 66000 22500 43500 74360 28500 45860 6240 4500 1740 89400 36000 53400 Wk:4 Conversion: $2.9*400= 1160 (Wk 4) Wk 5: Materials: 15000*$1.5 = $22500 Conversion: 15000*$2.9 = $43500 Wk 6: Materials: 3000*$1.5= $4500 Conversion: 600*$2.9 = $1740 (Wk 5) (Wk 6) 8800 3000 5800
68 Process account Units $ Units $ Opening WIP 1000 7200 Materials 20000 30000 Conversion 52200 Finished goods 16000 74360 Closing WIP 3000 6240 21000 89400 21000 89400 Abnormal normal loss 2000 8800

More Related Content

PPTX
Process Costing- Chapter Four
byEmily Bauer
 
PPT
Process costing
byPrem Chand
 
PPS
Process cost systems
byKhalid Aziz
 
PPTX
process costing
byzobyda preety
 
PPTX
Process costing explained
bySam zain
 
PPTX
5. process cost systems
byLeonardo Figueroa
 
PPTX
Process costing (1)
byBhushan Bankar
 
PPTX
Acc mgt noreen04 systems design process costing
byJudianto Nugroho
 
Process Costing- Chapter Four
byEmily Bauer
 
Process costing
byPrem Chand
 
Process cost systems
byKhalid Aziz
 
process costing
byzobyda preety
 
Process costing explained
bySam zain
 
5. process cost systems
byLeonardo Figueroa
 
Process costing (1)
byBhushan Bankar
 
Acc mgt noreen04 systems design process costing
byJudianto Nugroho
 

What's hot

PPTX
Process costing
bysigh_baba
 
PPTX
process costing ppt
bystudent
 
DOCX
Process costing
bySomaiyah Sarwar
 
PDF
Process costing
byFred Mmbololo
 
DOCX
Process Costing
bykaren_rod
 
PPTX
Process costing ppt
byNeeruJaswal2
 
DOCX
Process costing with case study mcom -1
byCHHAYA KAVITAKE
 
DOCX
EUP
byacctg2012
 
PPT
Costing system job costing
byOnline
 
PPTX
Job order costing
byMd Parvez Khan
 
PPTX
Equivalent production in Cost Accounting
bySanjeet Yadav
 
PPT
CPR Accounting presentation ppt
by01faz
 
PPT
Akaun Chapter 8
byWanBK Leo
 
PPTX
Process costing
byArif S
 
DOCX
Process costing
byacctg2012
 
PPTX
Job Order and Process Costin Accounting
byBahadir Beadin
 
Process costing
bysigh_baba
 
process costing ppt
bystudent
 
Process costing
bySomaiyah Sarwar
 
Process costing
byFred Mmbololo
 
Process Costing
bykaren_rod
 
Process costing ppt
byNeeruJaswal2
 
Process costing with case study mcom -1
byCHHAYA KAVITAKE
 
EUP
byacctg2012
 
Costing system job costing
byOnline
 
Job order costing
byMd Parvez Khan
 
Equivalent production in Cost Accounting
bySanjeet Yadav
 
CPR Accounting presentation ppt
by01faz
 
Akaun Chapter 8
byWanBK Leo
 
Process costing
byArif S
 
Process costing
byacctg2012
 
Job Order and Process Costin Accounting
byBahadir Beadin
 

Similar to Process costing manipal jaipur bba 3 semester

PDF
Process costing
byCat Kuching
 
PPTX
Cost accounting
byPunjabi University, Patiala
 
PPTX
Process Costing in cost accountingUNIT IV.pptx
bygowrikcom
 
PPTX
Process Costing (1).pptx fifo and lifo method for cost accouting
byAnushaHiremath14
 
PPTX
Process Costing (1).pptxfifo and lifo method
byAnushaHiremath14
 
PDF
Process Costing (1).pdf for 5th sem notes with equilent problems pdf
byAnushaHiremath14
 
PPT
Process Costing
byambadesuhas
 
PPTX
Cost Accounting All Slides Covered. Pptx
byFasihRehman28
 
PDF
Chapter 6 Job Order and Process Costing
byYesica Adicondro
 
PPTX
UNIT 2 PROCESS COSTING.pptx
byENOCK13
 
PPTX
Process Costingdabcbjbdajdfaafbjdbjaf.pptx
byArpitPal40
 
PPTX
Process costing
byAfifah Nabilah
 
PDF
| Managerial Accounting | Chapter 4 | Systems Design: Process Costing | Intro...
byAhmad Hassan
 
PPTX
Process costing
bygrvthakkar
 
PPTX
LESSON 8 PROCESS COSTING accounting.pptx NEW.pptx
byEldaahToi
 
PPT
Akuntansi Manajemen Edisi 8 oleh Hansen & Mowen Bab 6
byDwi Wahyu
 
PDF
Process_Costing.pdf lifo and fifo method for process costing
byAnushaHiremath14
 
PPTX
#2 Process Costing Process Costing Process Costing.pptx
byErwinEruWidodo
 
PDF
06042022_CA_Vipin_Bohra_Process_Costing_1649312452.pdf
byns7cul1
 
PPT
Hansen aise im ch06
byDaeng Aiman
 
Process costing
byCat Kuching
 
Cost accounting
byPunjabi University, Patiala
 
Process Costing in cost accountingUNIT IV.pptx
bygowrikcom
 
Process Costing (1).pptx fifo and lifo method for cost accouting
byAnushaHiremath14
 
Process Costing (1).pptxfifo and lifo method
byAnushaHiremath14
 
Process Costing (1).pdf for 5th sem notes with equilent problems pdf
byAnushaHiremath14
 
Process Costing
byambadesuhas
 
Cost Accounting All Slides Covered. Pptx
byFasihRehman28
 
Chapter 6 Job Order and Process Costing
byYesica Adicondro
 
UNIT 2 PROCESS COSTING.pptx
byENOCK13
 
Process Costingdabcbjbdajdfaafbjdbjaf.pptx
byArpitPal40
 
Process costing
byAfifah Nabilah
 
| Managerial Accounting | Chapter 4 | Systems Design: Process Costing | Intro...
byAhmad Hassan
 
Process costing
bygrvthakkar
 
LESSON 8 PROCESS COSTING accounting.pptx NEW.pptx
byEldaahToi
 
Akuntansi Manajemen Edisi 8 oleh Hansen & Mowen Bab 6
byDwi Wahyu
 
Process_Costing.pdf lifo and fifo method for process costing
byAnushaHiremath14
 
#2 Process Costing Process Costing Process Costing.pptx
byErwinEruWidodo
 
06042022_CA_Vipin_Bohra_Process_Costing_1649312452.pdf
byns7cul1
 
Hansen aise im ch06
byDaeng Aiman
 

More from sachin kumar sharma

DOCX
strategic managment coca cola
bysachin kumar sharma
 
DOCX
redcarpet credit card
bysachin kumar sharma
 
PDF
Credit rating risk 4 semester muj
bysachin kumar sharma
 
PPT
Risk all notes muj 4semester
bysachin kumar sharma
 
PPTX
Insurance risk 2 muj 4 semester
bysachin kumar sharma
 
PDF
Lifeinsurance 4 semester muj
bysachin kumar sharma
 
DOCX
hindustan petroleum 2018 report
bysachin kumar sharma
 
DOCX
Entrepreneurship 4 semester muj notes
bysachin kumar sharma
 
DOCX
entrepreneurship management rashmi bansal assignment
bysachin kumar sharma
 
PPTX
Project planning and control
bysachin kumar sharma
 
PPT
Project organisation structure
bysachin kumar sharma
 
PPTX
Project life cycle
bysachin kumar sharma
 
PPTX
Project identification & screening
bysachin kumar sharma
 
PPT
Project financing
bysachin kumar sharma
 
PPTX
Project feasibility
bysachin kumar sharma
 
PPT
Development finance institutions
bysachin kumar sharma
 
PDF
Transfer of goods
bysachin kumar sharma
 
PDF
Sales act
bysachin kumar sharma
 
PDF
Quasi contract
bysachin kumar sharma
 
PPTX
Offer and acceptance 1
bysachin kumar sharma
 
strategic managment coca cola
bysachin kumar sharma
 
redcarpet credit card
bysachin kumar sharma
 
Credit rating risk 4 semester muj
bysachin kumar sharma
 
Risk all notes muj 4semester
bysachin kumar sharma
 
Insurance risk 2 muj 4 semester
bysachin kumar sharma
 
Lifeinsurance 4 semester muj
bysachin kumar sharma
 
hindustan petroleum 2018 report
bysachin kumar sharma
 
Entrepreneurship 4 semester muj notes
bysachin kumar sharma
 
entrepreneurship management rashmi bansal assignment
bysachin kumar sharma
 
Project planning and control
bysachin kumar sharma
 
Project organisation structure
bysachin kumar sharma
 
Project life cycle
bysachin kumar sharma
 
Project identification & screening
bysachin kumar sharma
 
Project financing
bysachin kumar sharma
 
Project feasibility
bysachin kumar sharma
 
Development finance institutions
bysachin kumar sharma
 
Transfer of goods
bysachin kumar sharma
 
Sales act
bysachin kumar sharma
 
Quasi contract
bysachin kumar sharma
 
Offer and acceptance 1
bysachin kumar sharma
 

Recently uploaded

PDF
Types of Vegetable Gardens, College of Agriculture Balaghat.pdf
bybisensharad
 
PPTX
Role of the Uninstall Hook in Odoo 18 Module Cleanup
byCeline George
 
PPTX
Hypothesis. its definition and typrs pptx
byMakarand Joshi
 
PDF
FAMILY ASSESSMENT FORMAT - CHN practical
byDr. Sudhadevi Sadanandan
 
PPTX
Summary for systematic review - Adrine Nyamwiza
bySystematic Reviews Network (SRN)
 
PPTX
Vitamins and mineral deficiency , signs and symptoms associated with exercise
byvirupa chandrika reddy
 
PPTX
CROP RESIDUE MANAGEMANT AND ITS EFFECT ON SOIL HEALTH
byShraddha Maurya
 
PPTX
What is the Post load hook in Odoo 18
byCeline George
 
PDF
Basics of Systematic Literature Search - Nasra Gathoni
bySystematic Reviews Network (SRN)
 
PDF
The Drift Principle: When Information Accelerates Faster Than Minds Can Compress
byReality Drift Archive
 
PDF
Language and curriculum (B. Ed) semester 2
bynehapanna60
 
PPTX
The Art Pastor's Guide to the Liturgical Calendar
bySteve Thomason
 
PDF
Constipation.pdf
byAlakesh
 
PPTX
AsiaSweep 2025 Questions Only--FINAL .ppt
byArul Mani
 
DOCX
Mobile applications Devlopment ReTest year 2025-2026
byDr. Mazin Mohamed alkathiri
 
PDF
Blue / Green: Troop Leading Procedure (TLP) Overview.pdf
byBlue / Green Training
 
PDF
2025 | Quiz9 | Cinema Connect Trivia Questions Only
bySoumik Biswas
 
PPTX
Introduction to Sampling Methods :Basic Concept
byvetri339874
 
PDF
Projecte de la porta d'i5B: Els animals marins
byeduardrubio1
 
PPTX
ELEMENTS OF COMMUNICATION (UNIT 2) .pptx
byPOOJA KARVANDE
 
Types of Vegetable Gardens, College of Agriculture Balaghat.pdf
bybisensharad
 
Role of the Uninstall Hook in Odoo 18 Module Cleanup
byCeline George
 
Hypothesis. its definition and typrs pptx
byMakarand Joshi
 
FAMILY ASSESSMENT FORMAT - CHN practical
byDr. Sudhadevi Sadanandan
 
Summary for systematic review - Adrine Nyamwiza
bySystematic Reviews Network (SRN)
 
Vitamins and mineral deficiency , signs and symptoms associated with exercise
byvirupa chandrika reddy
 
CROP RESIDUE MANAGEMANT AND ITS EFFECT ON SOIL HEALTH
byShraddha Maurya
 
What is the Post load hook in Odoo 18
byCeline George
 
Basics of Systematic Literature Search - Nasra Gathoni
bySystematic Reviews Network (SRN)
 
The Drift Principle: When Information Accelerates Faster Than Minds Can Compress
byReality Drift Archive
 
Language and curriculum (B. Ed) semester 2
bynehapanna60
 
The Art Pastor's Guide to the Liturgical Calendar
bySteve Thomason
 
Constipation.pdf
byAlakesh
 
AsiaSweep 2025 Questions Only--FINAL .ppt
byArul Mani
 
Mobile applications Devlopment ReTest year 2025-2026
byDr. Mazin Mohamed alkathiri
 
Blue / Green: Troop Leading Procedure (TLP) Overview.pdf
byBlue / Green Training
 
2025 | Quiz9 | Cinema Connect Trivia Questions Only
bySoumik Biswas
 
Introduction to Sampling Methods :Basic Concept
byvetri339874
 
Projecte de la porta d'i5B: Els animals marins
byeduardrubio1
 
ELEMENTS OF COMMUNICATION (UNIT 2) .pptx
byPOOJA KARVANDE
 

Process costing manipal jaipur bba 3 semester

  • 1.
  • 2.
    2 Process costing Process costingis adopted when there is mass production through a sequence of several processes Example include chemical, flour and glass manufacturing It computes the average cost per unit by dividing the costs or production for a particular period by the number of units produced during the period
  • 3.
    3 Process 1 Process 2 Process3 Direct material Direct labour overheads Finished goods Cost of goods sold Direct material Direct labour overheads Direct material Direct labour overheads
  • 4.
    4 Accounting for ProcessCosting 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
  • 5.
    5 Process A Material 500 Labour100 Overhead200 Process B 800 800 800 Process B Process A800 Material 50 Labour 150 Overhead100 Process C 1100 1100 1100 Process C Process B 1100 Material 80 Labour 110 Overhead 210 Finished Gds 1500 1500 1500 Finished Goods Process C 1500 Cost of GDs Sold 1300 Bal c/d 200 1500 1500
  • 6.
    6 Accounting for lossesand scrap in process account
  • 7.
    7 Accounting for lossesin process costing In a production process, losses are inherent and unavoidable Nature of losses Normal loss Abnormal loss
  • 8.
    8 Accounting for scrap Damagedgoods may be sold as scrap Revenue arising from the scrap should be treated as a reduction in cost rather than an increase in sales revenue
  • 9.
    9 Transactions Accounting treatment Accounting entries Normal lossLosses 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 Dr. Process account Cr. Abnormal gain
  • 10.
    10 Transactions Accounting treatment Accounting entries Scrap valueof 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 Dr. Abnormal gain Cr. Scrap
  • 11.
    11 Transactions Accounting treatment Accounting entries Actual cash receivedfrom the sale of scrap Reducing material cost Dr. Cash Cr. Scrap
  • 12.
  • 13.
    13 Joyce Ltd. operatesa factory involving two production Processes. The output of process 1 is transferred to process 2. The information of production for January 2005 is as follows: Cost for Process 1 Materials: 3000 units at $5 per unit Labour $2400 Cost for Process 2 Materials: 2000 unit at $8 per unit Labour $1680 No opening and closing work in progress Output for January 2005 Process 1: 2300 units Process 2 4000 units
  • 14.
    14 General overhead, forJanuary 2005 amounted to $7140, are absorbed into the process cost at a rate of 375% of direct labour costs in process 1 and 496.4% of direct labour cost in process 2. The normal output of process 1 and process 2 is 80% and 90% of input respectively Waste matters from process 1 and sold for $4 per unit and those from process 2 for $6 per unit Required: a) Process 1 b) Process 2 c) Scrap d) Abnormal loss e) Abnormal gain
  • 15.
    15 Process 1 account Units$ Units $ Labour 2400 Materials 3000 15000 ($5 *3000) Overhead 9000 (2400*375%) Process 2 ($10*2300) 2300 23000 Abnormal loss ($10 *100) 100 1000 3000 264000 3000 26400 Scrap: normal loss (4*600) 600 2400 Cost per unit = Total expected cost Total expected output = $26400-$2400 3000-600 = $10 per unit
  • 16.
    16 Process 2 account Units$ Units $ Labour 1680 Materials 2000 16000 Overhead 8340 (1680*469.4%) Finished goods ($12*4000) 4000 48000 Abnormal gain ($12 *130) 130 1560 4300 49020 Scrap: normal loss ($6*430) 430 2580 Cost per unit = = $49020-$2580 4300-430 = $12 per unit Process 1 2300 23000 4430 50580 4430 50580
  • 17.
    17 Abnormal loss account Units$ Units $ Process 1 100 1000 Scrap 100 400 Profit and loss 600 100 1000 100 1000 Abnormal Gain account Units $ Units $ Process 2 130 1560Scrap: value of abnormal gain 130 780 Profit and loss 780 100 1000 100 1000 Loss on scrap value due to abnormal gain
  • 18.
    18 Scrap account Units $Units $ Normal loss 430 2580 (Process 2) Normal loss 600 2400 (Process 1) Abnormal loss 100 400 (Process 1) (100*$4) Cash –process 1 (600+100)*$4 700 2800 1130 5380 1130 5380 Abnormal gain (Process 2) 130 780 (130*$6) Cash – process 2 (430-130)*$6 300 1800
  • 19.
    19 Wk 2: Determining theoutput and loss: Process 2 Input (2300+2000) 4300 units Less: normal loss (10%) Expected output Actual output 4000 units 430 units 3870 units Abnormal gain 130 units Wk 1: Determining the output and loss: Process 1 Input 3000 units Less: normal loss (20%) Expected output Actual output 2300 units 600 units 2400 units Abnormal loss 100 units Back 1 Back 2
  • 20.
  • 21.
    21 Equivalent units ofproduction If there is no opening or closing work in progress (WIP) the unit cost of products can be obtained as follows Unit Cost = Sum of production costs Production quantity
  • 22.
    22 However, If thereis opening or closing work in progress, the partly completed production will have a lower cost than the fully completed production We have to converted the work in progress into finished equivalent units of production (EUP)
  • 23.
  • 24.
    24 The total productioncost for January 2005 was $40000. 8000 units had been completed and 4000 units wee 50% complete. Equivalent units of production 8000 units completed 8000 4000 units were 50% completed 2000 10000 Finished goods = Closing work in progress = $40000/10000 * 8000 = $32000 $40000/10000*2000 = $8000
  • 25.
    25 Three categories indetermining the equivalent units of production Opening work in progress Started and completed units Closing work in progress
  • 26.
    26 Opening work inprogress (OWIP) These units were started in the previous period and are to be completed in the current period 1/3 EUP completed In previous period 2/3 EUP completed in current period
  • 27.
    27 Started and completedunits (SACU) These units are started and completed in the current period 1 EUP completed in current period
  • 28.
    28 Closing Work inprogress (CWIP) These units are started in the current period and are to be completed in the coming period 1/3 EUP completed in current period Incomplete part
  • 29.
    29 First in Firstout Weighted average cost Two methods of cost flows in process costing
  • 30.
    30 First-in-first-out method Weighted average method The openingwork in progress is the first group of units to be processed and completed during the current period The opening work in progress is merged with the production of the current period to form one batch of production It separates the cost computations of the opening work in progress and the current period production The average cost per unit of the opening work in progress and the current period production is the same
  • 31.
    31 First-in-first-out method Weighted average method The EUPcomputation ignores the work performed on the opening work in progress during the prior period The EUP computation includes all work performed on the opening work in progress during the prior period Cost per unit = Current cost EUP Cost per unit = Cost of OWIP + Current Cost EUP
  • 32.
    32 FIFO Method WAVCOMethod 10 units of OWIP (60% completed in previous Period) 70 SACU 40 units of CWIP (20% completed) 4 EUP 70 EUP 8 EUP + + 82 EUP 10 units of OWIP (60% completed in previous Period) 70 SACU 40 units of CWIP (20% completed) 10 EUP 70 EUP 8 EUP + + 88 EUP
  • 33.
  • 34.
    34 Lucky Ltd. makestoys in a one-department production process. The following information is available related to the production in February 2005. Opening work in progress: 1000 units Degree of completion Cost % $ Direct materials 100 6000 Conversion (labour + overhead) 60 1200 February production: 20000 units $ Direct materials 30000 Conversion 52200 82200 7200 Closing work in progress: 3000 units (20% as complete as to conversion
  • 35.
    35 You are requiredto : Prepare Process 1 account using (a)The FIFO method of valuation; and (b)The weighted average method of valuation
  • 36.
  • 37.
    37 Wk 1: Number ofEquivalent units (EU) Total Materials Conversion Units EU EU Opening work in progress Other completed units Total completed units Closing work in progress 1000 0 400 (40%) 17000 17000 17000 18000 17000 17400 3000 3000 600 (20%) 21000 20000 18000 Wk 2: Costs Total Materials Conversion $ $ $ Costs incurred in the period Costs per equivalent units 82200 30000 52200 4.4 1.5 2.9 20000-3000 No opening WIP
  • 38.
    38 Wk 3: Cost ofunits transferred to finished goods and closing WIP Total Materials Conversion $ $ $ Opening WIP Cost to complete 1000 units completed 17000 units completed Transfer to finished goods Closing WIP 7200 6000 1200 1160 1160 8360 6000 2360 74800 25500 49300 83160 31500 51660 6240 4500 1740 89400 36000 53400 Wk:4 Conversion: $2.9*400= 1160 (Wk 4) Wk 5: Materials: 17000*$1.5 = $25500 Conversion: 17000*$2.9 = $49300 Wk 6: Materials: 3000*$1.5 = $4500 Conversion: 600*$2.9 = $1740 (Wk 5) (Wk 6)
  • 39.
    39 Process account Units $Units $ Opening WIP 1000 7200 Materials 20000 30000 Conversion 52200 Finished goods 18000 83160 Closing WIP 3000 6240 21000 89400 21000 89400
  • 40.
  • 41.
    41 Wk 1: Number ofEquivalent units (EU) Total Materials Conversion Units EU EU Opening work in progress Other completed units Total completed units Closing work in progress 1000 1000 1000 17000 17000 17000 18000 18000 18000 21000 21000 18600 Wk 2: Costs Total Materials Conversion $ $ $ Opening WIP Costs incurred in the period Costs per equivalent units 82200 30000 52200 4.5853 1.7143 2.871 20000-3000 3000 3000 600 (20%) 7200 6000 1200 89400 36000 53400
  • 42.
    42 Wk 3: Cost ofunits transferred to finished goods and closing WIP Total Materials Conversion $ $ $ Transfer to finished goods Closing WIP 82535 30587 51678 6865 5143 1722 89400 35730 53400 (Wk 4) Wk 4: Materials: 18000*$1.7143 = $30587 Conversion: 17000*$2.8710 = $51678 Wk 5: Materials: 3000*$1.7143 = $51678 Conversion: 600*$2.8710 = $1722 (Wk 5)
  • 43.
    43 Process account Units $Units $ Opening WIP 1000 7200 Materials 20000 30000 Conversion 52200 Finished goods 18000 82535 Closing WIP 3000 6865 21000 89400 21000 89400
  • 44.
    44 Lost units inprocess costing
  • 45.
    45 Nature of losses Normalloss Abnormal loss
  • 46.
    46 Normal loss Normal lossare the losses within the expectation during the production Reasons: Low quality materials and workers are engaged There may be an inherent problem in production process
  • 47.
    47 Abnormal loss The lostunits that is out of expectation
  • 48.
    48 Continuous loss Continuous lossesoccur evenly throughout the production process For example, the weight loss in making mild powder
  • 49.
    49 Discrete loss Discrete lossesoccur at the specific point A firm will not be aware of discrete losses unless the products are inspected at the inspection point For example, wrong buttons on a garment and wrong colour of toy cars m
  • 50.
    50 Types and naturesEUP calculation Continuous normal loss Excluding the lost units Continuous and abnormal loss Including the lost units Discrete and normal loss Including the lost units Discrete and abnormal loss Including the lost units
  • 51.
    51 Types and naturesTreatments for losses and costs Continuous normal loss Losses are included as product costs Costs are not assigned to the lost units Continuous and abnormal loss Losses are charged as period cost Costs are assigned to the lost units Abnormal loss will be written off to the profit and loss
  • 52.
    52 Types and naturesTreatments for losses and costs Discrete and normal loss Loss are included as product cost Cost are assigned to lost units Determining the point of work in progress: 1. Before passing inspection point, cost of lost units are only assigned to units transferred 2. After passing inspection point, cost of lost units are allocated between units
  • 53.
    53 Types and naturesTreatments for losses and costs Discrete and abnormal loss Loss are charged as period cost Cost are assigned to lost units Abnormal losses will be written off to the profit and loss account
  • 54.
  • 55.
    55 Lucky Ltd. makestoys in a one-department production process. The following information is available related to the production in February 2005. Opening work in progress: 1000 units Degree of completion Cost % $ Direct materials 100 6000 Conversion (labour + overhead) 60 1200 February production: 20000 units $ Direct materials 30000 Conversion 52200 82200 7200 Closing work in progress: 3000 units (20% as complete as to conversion
  • 56.
    56 Loss: 2000 units ouare required to : repare Process 1 account using the FIFO method: ase 1: Continuous normal loss ase 2: Discrete normal loss ase 3: Abnormal loss (both continuous and discrete loss)
  • 57.
  • 58.
    58 Wk 1: Number ofEquivalent units (EU) Total Materials Conversion Units EU EU Opening work in progress Other completed units Total completed units Normal loss 2000 Closing work in progress 1000 0 400 (40%) 15000 15000 15000 16000 15000 15400 3000 3000 600 (20%) 21000 18000 16000 Wk 2: Costs Total Materials Conversion $ $ $ Costs incurred in the period Costs per equivalent units 82200 30000 52200 4.9292 1.6667 3.2625 20000-3000-2000 No opening WIP
  • 59.
    59 Wk 3: Cost ofunits transferred to finished goods and closing WIP Total Materials Conversion $ $ $ Opening WIP Cost to complete 1000 units completed 15000 units completed Transfer to finished goods Closing WIP 7200 6000 1200 1305 1305 8505 6000 2505 73938 25000.5 48937.5 82443 31000.5 51442.5 6957 5000 1957 89400 36000.5 53399.5 Wk:4 Conversion: $3.2625*400= 1305 (Wk 4) Wk 5: Materials: 15000*$1.6667 = $25000.5 Conversion: 15000*$3.2625 = $48937.5 Wk 6: Materials: 3000*$1.6667 = $5000 Conversion: 600*$3.2625 = $1957 (Wk 5) (Wk 6)
  • 60.
    60 Process account Units $Units $ Opening WIP 1000 7200 Materials 20000 30000 Conversion 52200 Finished goods 16000 82443 Closing WIP 3000 6957 21000 89400 21000 89400 Normal loss 2000
  • 61.
    61 Case 2: Discretenormal loss It is assumed that the inspection point is set at 100% completion, all work has been performed. As a result, the costs of lost units are assigned to the units transferred Material added Closing WIP (20%) Inspection point (100%)
  • 62.
    62 Wk 1: Number ofEquivalent units (EU) Total Materials Conversion Units EU EU Opening work in progress Other completed units Total completed units Normal loss 2000 2000 2000 Closing work in progress 1000 0 400 (40%) 15000 15000 15000 16000 15000 15400 3000 3000 600 (20%) 21000 20000 18000 Wk 2: Costs Total Materials Conversion $ $ $ Costs incurred in the period Costs per equivalent units 82200 30000 52200 4.4 1.5 2.9 20000-3000-2000 No opening WIP
  • 63.
    63 Wk 3: Cost ofunits transferred to finished goods and closing WIP Total Materials Conversion $ $ $ Opening WIP Cost to complete 1000 units completed 15000 units completed Transfer to finished goods Closing WIP Normal loss 7200 6000 1200 1160 1160 8360 6000 2360 66000 22500 43500 74360 28500 45860 6240 4500 1740 89400 36000 53400 Wk:4 Conversion: $2.9*400= 1160 (Wk 4) Wk 5: Materials: 15000*$1.5 = $22500 Conversion: 15000*$2.9 = $43500 Wk 6: Materials: 3000*$1.5= $4500 Conversion: 600*$2.9 = $1740 (Wk 5) (Wk 6) 8800 3000 5800
  • 64.
    64 Process account Units $Units $ Opening WIP 1000 7200 Materials 20000 30000 Conversion 52200 Finished goods 16000 74360 Closing WIP 3000 6240 21000 89400 21000 89400 Normal loss 2000 8800
  • 65.
    65 Case 3: Abnormalloss (both continuous and discrete) For the discrete losses, it is assumed that the inspection point is set at 100% completion
  • 66.
    66 Wk 1: Number ofEquivalent units (EU) Total Materials Conversion Units EU EU Opening work in progress Other completed units Total completed units Normal loss 2000 2000 2000 Closing work in progress 1000 0 400 (40%) 15000 15000 15000 16000 15000 15400 3000 3000 600 (20%) 21000 20000 18000 Wk 2: Costs Total Materials Conversion $ $ $ Costs incurred in the period Costs per equivalent units 82200 30000 52200 4.4 1.5 2.9 20000-3000-2000 No opening WIP
  • 67.
    67 Wk 3: Cost ofunits transferred to finished goods and closing WIP Total Materials Conversion $ $ $ Opening WIP Cost to complete 1000 units completed 15000 units completed Transfer to finished goods Closing WIP Abnormal Normal loss 7200 6000 1200 1160 1160 8360 6000 2360 66000 22500 43500 74360 28500 45860 6240 4500 1740 89400 36000 53400 Wk:4 Conversion: $2.9*400= 1160 (Wk 4) Wk 5: Materials: 15000*$1.5 = $22500 Conversion: 15000*$2.9 = $43500 Wk 6: Materials: 3000*$1.5= $4500 Conversion: 600*$2.9 = $1740 (Wk 5) (Wk 6) 8800 3000 5800
  • 68.
    68 Process account Units $Units $ Opening WIP 1000 7200 Materials 20000 30000 Conversion 52200 Finished goods 16000 74360 Closing WIP 3000 6240 21000 89400 21000 89400 Abnormal normal loss 2000 8800