Process Costing - Review Notes

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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Updated  24 Apr 2016,  8 Dec 2011