intTION ( ‘the word PROCESS is defin, or events or any unchangin, jan of production as on an He defines PROCESS COSTING ag » zsses oF operations and averaged ov, 095, gt? ted by Eric. L, \g Persisting con, assembly tine” Kohler as ‘any unbroken series of acts, dition, or a sequence of operations making '@ method accounting whereby costs are charged to 1 units pr i EES Mesished product is the result of a mors units produced; it is employed principally where wf ssi vies, canneries and chemical aa is ed to specific orders, lots or unite | on™guished from job costing, where costs at less continuous operation, as in paper mills, plants; ypPLICABILITY = | Process Costing is employed in following industries : . 1 Metallurgical Industries ~ iron and steel, wire drawing, netting and polishing ete; Chemical Industries ~ drugs and pharmaceuticals, paints, soap making breweries, distilleries etc; Food Processing Industries ~ floor mills, meat products, milk dairy, confectioneries etc; Other industries like paper mills, cement works, textile industries etc. In the above industries the final product emerges only after two or more distinct processes. E.g. In oil industries Crushing, Refining, Finishing are the processes. . The product of one process becomes ‘raw material’ of next process. E.g. In paper industries pulp is made in first process, this becomes raw material in next process of paper making Different products may have a common prior process. E.g. Petroleum products ' are produced by the same refinery. ‘TURES ‘The cost of product is ascertained at each process or stage in process costing and ‘us following features 1 9 Production goes on without interruption and normally special production is not arranged for meeting any particular order. Various units produced in a particular process are identical. Production is divided in clearly defined processes. All direct and indirect costs are recorded for each process separately, Each process is a cost center. Costs are accumulated for different processes. Output of a process may be sold or transferred to the next process, Cost per uinit in process is determined by averaging. Normal wastage is charged onal thew. i Abnormal loss or gain may occur in addition to normal Scanned with CamScannerProduced give the ua nck in Progress being divided by in seen ee ne na re frees conting have been observed: “undertaies DDE! of processes or departments, Each &Pavtcular operation whic is a definite part omplete production. ach process or ‘Senlee and separate cost records are maintained ages and overheads are collect Sapa ed accontnghy St TE collected process wie or department ed from a process (Le. in case of joint during the cost period are apportioned to ¥8 and process costing are two important methods of Costing applied in ‘yee areas of factories and industries. The following are the main diference between jonsting and process costing Points | *)] Area of Application | of ing from farious products. Thus, the o# Scanned with CamScanner- ing (BBA ~ Sem. Nei v6 1a oven ot Acuntg BBA rs iv) Nature Product Cost centre vi) Transfer Product vil) Cost Unit ix) Factors Production fomogeneoue Tcngsiheble as poductd oa man’ basis. ~*~ conn ‘operated on in Materials / prov sharged to the Scanned with CamScannereo a rnaor product, others maybe byproducts, Which of the Panicle abi on ind SBSH ae byproducts oe etter of classieation. TaRoem ANT Serie relate importance othe prod, (Te proces in| Management ovo ‘ic teornt| 8 Nenagement poli inated 9 Ned or farther processing 8 Me relaie sles vale the products et, cays promineat is joss Is considera the excess of actial loss units over normal expesy ‘ver actual output. In process Account ‘units of abnormal losses is changed at cost to the process, ‘So Gross Abnormal Loss = Abnormal Loss Units x Process Cost per Unit ‘Again Net Abnormal Loss = Gross Abnormal Loss ~ Sale Proceeds / Reso, from Insurance Company / Expected Scrap Values Loos Units ¥v) Treatment of Abnormal Gain : In general sense, abnormal gai fs of materials, But in process co: lame es, Such products are armed. eit product, KGAA oducts “wo or ore products separated ip the course of in a wallet high saleable vale to ment recogaon as a malt eum industry gies sve jon products tke gaslene, Keoeene, inp al Maco sok \ed by produces}, e Tr Be LOMA, tonon, a relle vale! Free ae an ake St ren ae oe Ere wich att vibes rs aa se ep as gone te aaa ri acs an Sent Prods Digit: in importance and if due to a market ely turn into a by> by-product {s of insignificant ict ing produced simultaneously (eg. mutton and wool) are product incidentally produced in course of manufacture of & jdentally produced while manufacturing coke) is a. by Joint products; fg. coal gas ‘objectives, products treated as joint products by may be treated as by product by another industry and vice Profit and Loss Account. The Abnormal Gain Aecount can be drawn in the Cost Accounting in the flow le value value and objectives of ) co-products need not “Abnormal Gaia A/e from the same operation or same raw ucts may be changed without changing the others, In an automobile industry ks, cars are co-products. a1 | (he Process ia | which abnormal i | | } di = ain Unite x Process Cost per Unit ; Zo, Gross Abnormal Gain - Abnormal Gain Units » Pr on Be, Sie ara Gain = Grose Abnormal Gain - Scrap Value / Realsed fom" “SO wen 600 wre edo Pre Process Cost Accounts showin Scanned with CamScanner1 amt OBA ms or ce tig Sota count resent ae sips ani oo Particular [By Tansie Pyfecen YAY 15160) 15,000) By Tranaor racers 28/6 Scanned with CamScannerhie converting coal into coke, coal tar idiavailable hres thee disines processes and fer the ind tei sos proses ssn fn fl ypreduct ceded to cneemed Process sccount tin value, wastage of all processes i ited to indirect expenses so that all processes Bet Scanned with CamScanner ‘To Production ‘Overheads io wee 8.00, Tey prac were sol for 220 (Proves B). TH ToDitect Expenses owing cos ofeach roses and cost of production ef th Fished proc Pariclars To Outputi ‘Soya Prodet Factory produces Oil cake an Soya il and gt amines ya mie process @€ 1,500 erg rtm ES Scanned with CamScanner| nce and by experi cette ‘any wastage above the ‘normal stage below the ‘normal wastage normal Wastage = Nofmal Cost x Units of Abnormal Loss = ms ‘Normal Gurput Units in = Normal Cost x Unite of Abnormal Gain ‘Abnormal Gai ‘Normal Output Units ‘Abnormal Wastage Account Faas apn rani wee Wincess aye m=] By Sah are Bae =f | be B | it Ln =| | B| fue Scanned with CamScanner= wre Cnt Acounting B.A. Sem. ~1 (Nagy Mlustration 9 : yi 08th fellowng parla, peare ses Acout nd cleat bors ‘To Factory Expenses ‘To balance b/d trough bo dine Proves A ant B ant een # ean 1 finshed formation, yw ae ruse 9 fepate Ps ASCE, Scanned with CamScanner‘Worki ing:Not 2 Costof Abnormal Los trough dre dst roses fom th accounts for he wah ending January, 2004 Process] Process TT z z Process T @ 7 7980] 356 3.000] 4/000 2.900] __3,000| __4,000 cao icas Te ws 00 ok f aerials oF work in Scanned with CamScanneraoe’ 9 a circ ne rt ae ia a wet tn Sid OT seca a i | Sr ras mas ee ence > res = “ Le | # Bias Game Prepare Proce Cast Aecounts and Abnormal Lass or Guin Accounts Sees iat » Process C sotto : : seco im & i Tops neces ie = Cae mee _ se a te R i stn ost god pdcin, ong March th sores passed $9,500 production blanks, to Process A at 3 col Scanned with CamScanneree ode” >, Sete - ens o— woe Mustration 15; ey wee A chemical factory manufac uct whict ses the tree “ne | cruel ce me a i phere Tag," ProcssA — ProcesB Process ‘Transfert next process ‘Transfer to warehouse for sale Tons Cost per ton “Manufacturing wages and expenses ‘You are required a prepare atcounts showing. ToMaterial @€20 ‘To Manufacturing Wages ‘and Expenses be. Paris Fo Tranter fom eB neato oserals 034 0 1.260) By Sale of Scrap | Scanned with CamScannerre Let wastage = w units Thus wet 696, Tre fallowing Mot March 201s SS ake extracted from the costing records of an oll mill forthe yey Purchase of 500 tons of copra at 400 per ton PB Etey Festa Se | Toray Eapmes | tags of iat = 95 « 100 = 7.63% ow! a | ginpsness Te expt inured dung pred wee a flame ToBalance b/d @ 85,714 it A produc pares Hout tts Process. The ouput of xc proces ete the rw ester ot he is terial 900 abou 00 Nanuftctrng overhead 10.000 000 unis were sued tothe 1 Process andar pening, the. ‘Cost per ton oferue oil: 192,080 + 250; *BA-cox sccaming (Sem. —D Net UaNeD) ~~ Scanned with CamScanneree ms woe (Cost Accounting (B.A. ~ Sem. — 1) (Nappa costing . us = ‘uy ota ee Hews tg ee 7 a : vem rma i sf materials er ton 1000 tos tons Som Bie — wey aanfenine ones 28,000 25,250 ‘owe process accounts show 830 tons 780 tons rears Foe "ing CoM Per ton ofeach proces, There was no sack of work-a-Progress oy pee om J Te Manufacturing Exp. ‘To Balance b/A@€5.714 ‘To Labour ‘To Manufacturing Overh ‘To Balance b/d @T 6.79 Scanned with CamScanner: wow fo Manutactu ng Exp, ‘0 Other Factory Exp. Toe et 3 | i ee cae. Beene To Balance b/d @ 218 prods nclaing a deepest "Nima which pss rout ster fo the finished goods ware bowss. Dusing 3500 000 1200 930 nis Units * Units 93008700 7.900 is 3% 10% e020 Re 050 Re. 1.00 ov oa os) Ao x Scanned with CamScannervor a rns pA ne ne ceo amt #1 ‘ares prac MARS Pe a const ee fetovog wee ‘To Production Overhead (See Note) _ ToBalance ba ges 200 15,300 T.00o By Bre 5 S00. By Maun Pate NAPS (ANY 00 x mua rote ae — Teta preteen F150 \ TE gums gt TSS \ Scanned with CamScannerA fotory producing ante" ako produces by-product Product The oa costof Manas en tl is io ‘dhe manner In which the j 1 40%) "30%! 20% 3 a he podcast To ol macs ppoprd beet ese nn Sues Scanned with CamScannerFa wee w ‘Musteation 27 : fe napufacurig concer the joa expenses of manufacture of ist products An B& C rm ion 28 wt A" yields by prodicts Band". The Jit and ubsequen expenses of manufacture WeTE AS Overhead ‘To Selling and dis Overhead ‘To Profit, Scanned with CamScanneront Acwting BA. Sem, To Share of Joint Expenses ToNatenaie Pe joint products alized may be teated a5 p ‘oF amount realized may seeasary to find out cox g the main and by-predus the basis of aumberg Such addecs, ‘product. Then © 2,200 4,500 1500 Less : Post separation expenses ‘Amount to be eredited to main product, a Moy eons 100 per of wis peda he prodaction of Comat X mats te ese of proce hi #eommercal vise Scanned with CamScannerLr ae ye. Cost Acute (BBA.~Sem—D Neng ig, | po ‘s) Total Cos of Product Y Masenon 1: som 34 ot Aw yi peo ete pod A wich els yoda Bad Th ctl i i hao ni a —e wit pda Aw sets Banda ° The Poin xe pod asa pecs of eee 31,228 1% eect, Subvequent pn Bea | REST | a a 7 a Dice Wages 2m) 2 wheal mi oS ros KWo Cas € 0H, € TOO aed SAD eopeneDK ws ee 3) =3) 2 pcg ost ac ho € we be 28 pt tsa 20 peek vedon A Statement of Cort and Prof of Product A ‘Calculation ofthe Share ofB and Cia Jat Cast: eRe BT Pree \ 2 2 production of by-product X and Y Scanned with CamScannerih two Process A and B, The dels of produstion sod expend tae fr | (0 Mare 198) fg Weight or a were at Waste epee Satan TS ac (U, Mareh 1999) (NU. Mach 1999) (00. March 1998) | "04. ~cost acouning (Sen, tour a NS = i Be Scanned with CamScannera ven 10. From the folowing infomation, write Proces B Account in the book ofX Co Units wansfired fom Process A000 nis at ech. 1 Teneined fom Paces 26 Material conse Ga Process) Wages house. Cort Asating BBA.~S%-D Nay iy 000. The ouput of Process A as 900 ita (200 March 200) fof serap 100 per ton, $0% production transfered 9a (acu, Marc 2009, ww) ring expenses WeTe incur ing te mow ly, 198 Press A Prose Praca Scanned with CamScanner22 26, wire cu Aco ‘i he ‘A Bic iid ough i tint Proce an BF Iheyure Paces asa ir Matern Coasumed Dist Labour Manicure Bepenses Inpuin he sess 4 Ho per 10 nits ‘A product passes trough vo distin! Processes AandB- From the following you are required to prepa Poses A Asn 5 per 100i 010. Oca reper Aco tro Cost of Matera (pet on) Wages Factory Overbead 10% is ep. Soap (UC i 100% (1 March 8) rough thee processes known a5 A, Band C. The prose the month of uly 85 ‘alle produced “ a = se ranted 10 BE POSES ‘oGodown rear Process Accounts inthe boks of Loi Li wer ing information forthe fest 6 momo be years rate Poems Scanned with CamScanner