Process Costing

There are two main types of cost accounting systems. Companies select a method that best matches the flow of work in their business. These methods are used to allocate all production costs: labor, materials and overhead. Job order costing - work is broken into jobs; each job is tracked separately. Process costing - a large quantity of identical or similar products are mass produced.

Process Costing
Process costing is a type of operation costing which is

used to ascertain the cost of a product at each process or stage of manufacture.

It is a method of allocating manufacturing cost to products

to determine an average cost per unit.

It traces and accumulates direct costs and allocates indirect

costs, through a manufacturing process. Costs are assigned to products, usually in a large batch, which might include an entire month's production. Eventually, costs have to be allocated to individual units of product. Alternatively, job costing can be used to track the flow of costs.

Examples of industries using Process Costing include:

Bottling Pharmaceuticals Cement Paint Coal Distilleries Electricity Ice Soap Sugar

Chemicals Cooking oil Electric appliances Flour Natural gas Petroleum Products Rubber Steel Textile.

Process Costing System

Work in Process Account Direct materials
DEPT. A
Direct Labor

Work in Process Account

DEPT. B
Direct Labor

to Finished Goods

Factory Overhead

Factory Overhead

House No. 19/20, Survey No. 35, Meet Pada, Kamba Road, Near Shivam Tea House, Village - Khooni, Bhiwandi.

Prateek Agency
Prateek Agencys journey originally began two decades ago,

as a clearing and forwarding agent for yarn. Now, this experience of buying and selling raw materials developed into a strong point as the company developed a huge network of clients and also a deep understanding of the product. They started researching in this field. Soon they were successful and in 2007 they setup a factory at Bhiwandi, near Thane. A C&F agent developing into a manufacturer surely speaks for the company and its dedication towards accepting change and eagerness to grow.

CORPORATE VISION & MISSION

Our aim is to become the buyer's first choice all

around the world.

To achieve this target we make sure that we stay true

to the highest standards of excellence and customer's satisfaction.

Our vision is to provide our customers with just the

one venue to supply all their requirements.

DIVISIONS
Spinning
Weaving Processing Design and Creation Embroidery Stitching

INTRODUCTION TO STUDY
Cost per unit produced is the average cost,

which is calculated by dividing the total process cost by number of units produced. The sequence of operations or process is specific and pre determined. Some loss of material in process (due to chemical action evaporation etc) is unavoidable. Processing of raw material may give rise to the production of several products these several products produced from the same raw material may be termed as joint products or byproducts.

OBJECTIVE OF STUDY
1. To understand the process of manufacturing. 2. To study of input output of each process. 3. To find out cost of each process. 4. To find out normal and abnormal wastage.

Material (Shirt and Pant) manufacturing processes

1) 2) 3) 4) 5) 6) 7)

Doubling process Reeling process Dying process Winding process Warping process Weaving process Inspection and packing process

Process 1 Doubling Process

Firstly the yarn is purchased from the market after then it is proceed to processes into doubling process, which is required for actual material (shirt and pant) production. In actual production, single yarn is not so important thats why it is proceeds into single yarn by doubling process. Started in Production: 1000 units @ 10 = Rs. 10,000 Cost Added by the Department Material = Labour = FOH = Total cost =

Rs. 500 Rs. 200 Rs. 300 Rs. 11,000

Unit completed and transferred to next department = 900 units Normal Loss 10% = 100 units

Process 2 Reeling Process

After doubling process, reeling process is proceeds. In this process, yarn is wound on wrapper bobbins then transfer into reeling process.

Cost calculation: Started in Production with = 900 @ 12.22 Cost Added by the Department Material = Labour = FOH = Total cost =

= Rs. 1500 Rs. 200 Rs. 300

Rs. 10,980

Rs. 12,980

Unit completed and transferred to next department =

Normal Loss 10% Abnormal loss = = 90 units 10 units

800 units

Process-3 Dying process

After reeling process, dying proceeds. In this process,

yarn is dipped completely in the oil. Then it is bleached; this bleached yarn is dried in sunlight and then bleached yarn is put into the color and again dried in the sunlight.
Cost is being calculated as in preceding process

Process-4 Winding process

The yarn is wound on wrapper bobbin and cone

respectively to provide a wrap for weaving the material (shirt and pant).

Cost is being calculated as in preceding process

Process-5 Warping process

From the wrapper, bobbins, a wrapper beam is

prepared which is a input for the looms. Sizing and starching of the wrap, threads are not required.
Cost is being calculated as in preceding process

Process-6 Weaving process

The wrap beam is ready to weave material (shirt and

pant) on the loom. The actual insertion of threads is controlled by the Jacquard cards, which are set up as an attachment above each loom.
Cost is being calculated as in preceding process

Process-7 Inspection and packing process

After manufacturing of the materials (shirt and pant), all the materials are inspected for the quality and after inspection, they are sent for packing. On completion of all processes the following units are produced and the cost calculation is a under:Unit started in Production = 500 @ 50 = Rs. 25,000

Cost Added by the Department Material = Labour = FOH =

Rs. 2000 Rs. 200 Rs. 300 Rs. 28,000

Total cost

Unit completed and ready for sale = 500 units @ 56

Thank You!