.

Process Costing is used to determine the cost of a product at each operation,process or stage of manufacture Process Costing is used to ascertain the cost of product at each stage of manufacture where the material is passed through various operations to obtain a final product.

Process costing system is used in following industry. 1) Textiles. 2) Rubber. 3) Steel. 4) Glass. 5) Paint. 6) Cement

1) The factory is divided into different process which are the cost centres. 2) The Production is continous and the final product is the end result of a series of Processes. 3) The output of one process becomes the input for next process and so on until the finished product is obtained.

4) 5) 6)

A separate account is maintained for each process. All costs, direct and indirect, are recorded for each process. Controllable and avoidable wastage may usually arise at different manufacture.

Job Costing Production is against specific orders Costs are seperately determined for each job Each job is separate and independent

Process Costing Process is continuous flow. Costs are find out for each process or each department. Output of one process becomes input for next process. So each process is dependent to other process Costs are calculated at the end of costs period. Transfer of costs from one process to another is made as the production moves from one process to another

Costs are calculated when the job is completed There are no transfer from one job to another .


Pariculars TO Direct Material To Direct Labour

Process A A/c
Amount (In Rs.) _______ _______ Partculars By Normal Loss By Abnormal Loss Amount I (In Rs.) _______ _______

To Direct Expenses
To Factory Overhead Total

_______
_______ _______

By Process B A/C

_______

_______


Partculars

Abnormal loss A/c

Amount (in Rs.) _______ Partculars Amount (in Rs. ________ ________

To Process A/C

By Cash By Profit & loss A/c

Total

________

Total

_________

It is a part of the process loss which is caused under normal circumstances. It can not be avoided by any steps or measures by Management. Normal loss is calculated as certain percentage of the input in respective process. Normal loss may have scrap value. The percentage of normal loss is determined in advance basis of manufacturing process.

It is a part of the process loss which is caused due to abnormal condition or circumstances. Example: labour strike, breakdown of machinery, power failure,accidents.etc. Abnormal loss is credited to process A/C and debited to abnormal loss.

Abnormal gain arises when the actual output or production is more than normal production or output. Abnormal is debited to process A/C and Credited to Abnormal Gain A/c

The output of one process is transferred to the next process , not at cost,but market value or actual cost plus a percentage of profi. The difference between the cost and the tranfer price is known as inter-process profits.

Normal Production= Input in units- Normal loss (in units) Rate per unit of output = cost of Process- Scrap value of normal loss Normal Production

Join Products: A joint product is two or more products are obtained from the same raw material ,and each having equal importance. The joint products derived from a process differ from each other in appearance. The joint products must arises out of the same process or the end of a series of processes. Example : In Dairy industry Milk is main products and butter,icecream,buttermilk is joint products.

A By products is secondary products obtained during the course of manufacturing ,having a small importance as compared with that of chief products. By products have saleable value or usable value. Example: In Timber, Saw dust, small cutoff, Bark is by products.

Joint Products Stage of operation At the end of the process

By Product During the process

Value
Costs

More or equal value

Shared on an agreed basis Goes to market as an Independent products

Scrap value
Generally borne by the main products No identity in the market.

Sale

Examples

Oil,kerosene,fuel

Sugar main products,fiber for lining and moles.

A joint cost is a cost incurred in a joint process The common cost occurred in a process from which different products emerged out are known as joint products. cost of two or more products that arise from the same manufacturing process. Joint costs may include direct material, direct labor, and overhead costs incurred during a joint production process.

1) 2) 3) 4) 5) 6)

Average unit cost method Physical Unit Method. Market value method Sales value method. Weighted average method Market value after further processing

1) Non Cost Method. Other income method. By product value deduct from total cost. Credit of by product value less selling and distribution costs to process account. Reverse cost Method 2) Cost Methods. Opportunity or replacement cost method. Standard cost method.