In processes output can not be separated and accounted for as in discrete product manufacture. The production process is continuous. Therefore period costs are accumulated and they are charged to the output in a period. In the process there is work-in-progress. So at the start of a period there is beginning inventory and at the end of the period there is ending inventory. During the period, there is input of costs. From these three figures cost of production of a period is calculated and charged to the number of units produced during the period.
Process Costing Illustration
Assembly Department
Physical Units for Dec 2015
Work in progress, beginning inventory (Dec 1) 0 units
Started during December 30 units
Completed and transferred to FG Stores 30
WIP Ending 0
Total Costs for Dec 2015
Direct materials $12,000
Conversion Cost incurred in the process 24,000
Total assembly department costs Dec 2015 36,000
Hence assembly cost per unit of output is $36,000/30 = $1200, itemized as:
Direct material cost $400
Conversion cost 800
Total cost $1200
Bibliography
Detailed explanation of Process Costing and normal and abnormal losses in process
http://www.futureaccountant.com/process-costing/study-notes/characteristics-features-application-industry.php
Process Costing
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__________________
Rutgers Accounting Web
Updated 24 Apr 2016, 8 Dec 2011
Process Costing Illustration
Assembly Department
Physical Units for Dec 2015
Work in progress, beginning inventory (Dec 1) 0 units
Started during December 30 units
Completed and transferred to FG Stores 30
WIP Ending 0
Total Costs for Dec 2015
Direct materials $12,000
Conversion Cost incurred in the process 24,000
Total assembly department costs Dec 2015 36,000
Hence assembly cost per unit of output is $36,000/30 = $1200, itemized as:
Direct material cost $400
Conversion cost 800
Total cost $1200
Bibliography
Detailed explanation of Process Costing and normal and abnormal losses in process
http://www.futureaccountant.com/process-costing/study-notes/characteristics-features-application-industry.php
Process Costing
__________________
__________________
Rutgers Accounting Web
Updated 24 Apr 2016, 8 Dec 2011
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