Process Costing Method (Cost Accounting)

Contents and Descriptions:

Meaning of Process Costing

Objective of Process Costing:

1. Selling price at the end of every process can be calculated.

2. To find out profit at the end of every process.

3. Make or buy decision.

4. Sold or Further processing decision.

5. To find out the total cost and cost per unit of every process.

Application of Process Costing :

1. Textile mill

2. Sugar mill

3. Chemical Industry

4. Petroleum Industry

5. Cement Manufacturing

6. Vegetable Ghee Industry

7. Oil refining

8. Soap making

9. Lather industry

10. Distilleries Industry

11. Drugs Industry

12. Paint industry

Format of Process Costing

Normal Wastage, Abnormal Wastage and Abnormal Gain/Effectiveness

Meaning of Wastage/Loss in Process

(a) Normal Wastage/Normal loss

Meaning of Normal wastage

Format of Normal Wastage Account

Entries of Normal wastage

(b) Abnormal wastage/Abnormal loss

Meaning of Abnormal wastage

Entries of Abnormal wastage

Meaning of Abnormal Gain in Process

Disclosure Of Abnormal Wastage (Or) Abnormal Gain

Calculation of Amount of Abnormal Wastage Or Gains

Entries of Abnormal Gain

Inter Process Profit

Meaning of Inter Process Profit

Contents of Inter Process Profit :

1. To maintain secrecy of correct cost of process.

2. To know whether the cost of production competes with the market price.

3. To find out the efficiency of each process.

4. To know the profit included in each process.

5. To know whether a product should be processed internally or to be bought in the market

Calculation of Amount Transfer to P/L

Joint Product

Meaning of Joint Product

By-Product

Meaning of By-Product

Many Practical Problems and Many illustration for better understanding