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Cost and ManagementCost and ManagementAccountingAccounting
TopicTopicProcess costingProcess costing
Process costingProcess costing• Process costing is a type of costingProcess costing is a type of costingsystem that is use...
Features of process costingFeatures of process costing• Process costing is a type of operationProcess costing is a type of...
Illustrating Process CostingIllustrating Process CostingDirect Materials, Direct LaborIndirect Manufacturing CostsDepartme...
Example of process costingExample of process costing• SugarSugar• TextileTextile• CementCement• FlourFlour• SoapSoap• IceI...
Case studyCase studyPaxy sind chocolates worksPaxy sind chocolates works hashasstarted out his business in 1978.it is asta...
Costing detailCosting detailMaterial costMaterial costkilogram RSkilogram RSSugar 600 24000Sugar 600 24000Fat 360 45000Fat...
Five Steps in Process CostingFive Steps in Process CostingStep 1: Summarize the flow of physical units ofoutput.Step 2: Co...
Physical Units (Step 1)Physical Units (Step 1)Physical unitsFlow of ProductionWork in process, beginning 0Started during c...
Compute Equivalent UnitsCompute Equivalent Units(Step 2)(Step 2)Equivalent unitsDirect ConversionFlow of Production Materi...
Compute Equivalent Unit CostsCompute Equivalent Unit Costs(Step 3)(Step 3)Direct ConversionMaterials Costs$84,050 $62,000E...
Summarize and Assign TotalSummarize and Assign TotalCosts (Steps 4 and 5)Costs (Steps 4 and 5)Step 4: Total costs to accou...
conclusionconclusionAt the end we can conclude that processAt the end we can conclude that processcosting is used for larg...
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Process Costing

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Process Costing

  1. 1. Cost and ManagementCost and ManagementAccountingAccounting
  2. 2. TopicTopicProcess costingProcess costing
  3. 3. Process costingProcess costing• Process costing is a type of costingProcess costing is a type of costingsystem that is used for uniform orsystem that is used for uniform orhomogeneous product.Process costhomogeneous product.Process costaverage the cost over all unit to come toaverage the cost over all unit to come tothe per unit cost.the per unit cost.
  4. 4. Features of process costingFeatures of process costing• Process costing is a type of operationProcess costing is a type of operationcosting which is used to ascertain the costcosting which is used to ascertain the costof the product at each process or stage ofof the product at each process or stage ofmanufacturing.manufacturing.• It is a method of allocating manufacturingIt is a method of allocating manufacturingcost to product to determine an averagecost to product to determine an averageper unit cost.per unit cost.• It traces and accumulate direct cost andIt traces and accumulate direct cost andallocate indirect cost through aallocate indirect cost through amanufacturing process.manufacturing process.
  5. 5. Illustrating Process CostingIllustrating Process CostingDirect Materials, Direct LaborIndirect Manufacturing CostsDepartmentADepartmentBFinished Goods Cost of Goods Sold
  6. 6. Example of process costingExample of process costing• SugarSugar• TextileTextile• CementCement• FlourFlour• SoapSoap• IceIce• RubberRubber
  7. 7. Case studyCase studyPaxy sind chocolates worksPaxy sind chocolates works hashasstarted out his business in 1978.it is astarted out his business in 1978.it is apartnership based manufacturingpartnership based manufacturingconcern.They produced different range ofconcern.They produced different range ofconfectionery products but mainly theyconfectionery products but mainly theyprovide chocolate slabs.provide chocolate slabs.
  8. 8. Costing detailCosting detailMaterial costMaterial costkilogram RSkilogram RSSugar 600 24000Sugar 600 24000Fat 360 45000Fat 360 45000Milk powder 72 7920Milk powder 72 7920Cocoa butter 96 11520Cocoa butter 96 11520Lecithin 6 360Lecithin 6 360Labour cost 450 Rs per labourLabour cost 450 Rs per labour
  9. 9. Five Steps in Process CostingFive Steps in Process CostingStep 1: Summarize the flow of physical units ofoutput.Step 2: Compute output in terms of equivalent units.Step 3: Compute equivalent unit costs.Step 4: Summarize total costs to account for.Step 5: Assign total costs to units completed and tounits in ending work in process inventory.
  10. 10. Physical Units (Step 1)Physical Units (Step 1)Physical unitsFlow of ProductionWork in process, beginning 0Started during current period 35,000To account for 35,000Completed and transferred outduring current period 30,000Work in process, ending (100%/20%) 5,000Accounted for 35,000
  11. 11. Compute Equivalent UnitsCompute Equivalent Units(Step 2)(Step 2)Equivalent unitsDirect ConversionFlow of Production Materials CostsCompleted andtransferred out 30,000 30,000Work in process,ending 5,000 (100%) 1,000 (20%)Current period work 35,000 31,000
  12. 12. Compute Equivalent Unit CostsCompute Equivalent Unit Costs(Step 3)(Step 3)Direct ConversionMaterials Costs$84,050 $62,000Equivalent units 35,000 31,000Cost per equivalent unit $2.4014 $2.00Total production costs are $146,050.
  13. 13. Summarize and Assign TotalSummarize and Assign TotalCosts (Steps 4 and 5)Costs (Steps 4 and 5)Step 4: Total costs to account for: $146,050Step 5: Assign total costs:Completed and transferred out30,000 × $4.4014 $132,043Work in process, ending (5,000 units)Direct materials 5,000 × $2.4014 12,007Conversion costs 1,000 × $2.00 2,000Total $146,050
  14. 14. conclusionconclusionAt the end we can conclude that processAt the end we can conclude that processcosting is used for large quantity ofcosting is used for large quantity ofidentical and similar products are massidentical and similar products are massproduced.produced.

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