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Process Costing

The document outlines the concepts of normal loss, abnormal loss, and abnormal gain in process costing, emphasizing their implications on product costs. It details the steps involved in process costing, including timelines, input/output tables, allocation of costs, and calculation of equivalent units. Additionally, it provides examples and calculations for understanding the application of FIFO and weighted average methods in determining costs.

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theedestroyer418
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11 views2 pages

Process Costing

The document outlines the concepts of normal loss, abnormal loss, and abnormal gain in process costing, emphasizing their implications on product costs. It details the steps involved in process costing, including timelines, input/output tables, allocation of costs, and calculation of equivalent units. Additionally, it provides examples and calculations for understanding the application of FIFO and weighted average methods in determining costs.

Uploaded by

theedestroyer418
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Process Costing

Normal loss- Expected loss forms part of cost of product,

arises from opening WIP or newly started production.

Abnormal loss- Unexpected can be avoided(Accident),

-not part of normal process of manufacturing.

-Recorded as a expense, not allocated to product cost.

-Only arises from newly started production

Abnormal Gain-need knowledge won’t need to apply in question,


Expected loss> Actual loss.

Steps in process costing


1. Timeline
2. Inputs/outputs table( FIFO Split completed into opening WIP and
newly started, Split normal loss into the 2 categories,) Only have
abnormal loss from closing WIP) (Weighted average, completed from
whole process, normal, abnormal all from whole process)
3. Allocation of normal loss(Split. Between completed, closing WIP,
Abnormal loss)Table (Slides) only relates to newly started
production.
4. Equivalent units(FIFO, Current period) (Weighted Average, Current
and prevois period)
5. Calculate total costs(FIFO, Current period costs) (Weighted average,
Current and previous period costs)
6. Cost per equivalent units
7. Allocate costs
8. Answer the required

 If abnormal loss occurs at a different stage in the process it does not


attract part of the normal lost.

Class example 4

Equivalents units FIFO


Outputs table Labour Overheads

FG:OWIP (600x99%)= 594 0 594x 20%/60%

FG: Newly started ((5000- 4554 4554


400CWIP)x99%)=4
554
CWIP 400 (Did not pass 200 (50%) 0
through normal
loss has not lost
the output yet)
NL OWIP (600x1%)= 6 0 1

NL Newly started (5000- 46 (50%/60%) x 46


400)x1%=46 =38.33
Total 5600 4800 4791.33

Equivalent units Table Weighted average

Total Output Labor Overheads

FG 5000+600- 5148 5148


400x99%= 5148

NL 600 + 5000 – 400 52 52 x 50%x60%


x 99%= 52 =43.33

CWIP 400 200 0

Total 5600 5400 5191.33

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