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FA Accounting Week 6
3
Preparing Management Accounting Information
Learning objectives
Students will establish Process Costing
Students will determine what is Process and Service Costing
Process Costing
Process Costing Technique
Process costing is one method of unit costing
It is used in organisations where an identical product is produced by a continuous flow of output
Process costing
It is called Process Costing as there is no unit with an individual identity as each unit is part of the process.
Process costing
The organisations which use Process Costing are:
Mass Producers of their products
A broader view of the situation has to be taken when establishing a production cost per unit produced
Process costing
As there is no attempt to identify costs with specific units
The method used in Process Costing is
Average Cost per Unit.
Average Cost per Unit
This is calculated as such:
Total costs for a period of time
Total number of units produced in that period
Process costing
General Features that can be applied to Process Costing
Finished goods are produced from a series of consecutive processes (departments)
Each department carries out part of the total process and each stage of production must be complete before the next stage can be started
Process costing
General Features that can be applied to Process Costing
Details of each stage will be recorded in its own separate process account and normal double entry principles will be applied.
The costs of the process are debited to the process account. Material and labour costs will be separately identified for each process and the overhead costs will be absorbed into the process in the same way as other cost accounting systems.
Process costing
General Features that can be applied to Process Costing
Details of each stage will be recorded in its own separate process account and normal double entry principles will be applied.
The costs of the process are debited to the process account. Material and labour costs will be separately identified for each process and the overhead costs will be absorbed into the process in the same way as other cost accounting systems.
Task
Task
Carry out research on the following
Process costing
Service costing
From your research identify the uses of the above
Plenary
Plenary
What knowledge have you gained this lesson?