Relates to a costing system where each unit/ batch of output of

products/services is unique NB!!

Job costing
This creates the need for the cost of each unit/ batch to be calculated
Relates to situations where masses of identical units/batches are produced Job costing VS
Proces
Thus making it unnecessary to assign costs to individual units/ process costing
s
batches of output
costing
Instead the average cost per unit/batch of output is calculated by
dividing the total costs assigned to a product/service for the period
by the number of units/batches of output for that period

Step 1=> Draw a picture of the process for yourself, to understand which
costs are added where in the process
Step 2=> Must remember to use actual units and not equivalent units here
Step 2 example

Step 3 + 4 example

NB definitions Unit 6- Steps in

Process process Basic exaples-
costing costing They do get
more complex

Step 5 example

If there are 2 processes, remember to take the costs from process 1 into
account with process 2

Formula?
SV = Scrap Value
Generals- NB!! Do examples in slides
Note: Cost per unit is based on normal production cost per unit and is not Process
affected by abnormal gain. costing
Objective is to produce a cost per unit based on normal efficiency
 Eventually, costs have to be allocated to individual units of product. It assigns
average costs to each unit
The costing method applicable where goods or services result from a
What it is?
sequence of continuous or repetitive operations or processes
Costs are averaged over the units produced during the period
Process costing
Explain the difference between weighted average and FIFO methods of stock theory Why
evaluation process Process costing is suitable for industries producing homogeneous
costing? products and where production is a continuous flow.
Both the units and the value of O/WIP are merged with the
current period costs and production to calculate the average
cost per unit.
Weighted average method Explain how to deal with normal losses, abnormal losses and abnormal gains in the
Smooths out unit costs from month to month process costing statement
O/WIP is assumed to be the first group of units to be processed and
completed during the current period.
The O/WIP is therefore assigned separately to completed production
and the cost per unit is based only on current costs and production for
the period.
FIFO-method
The C/WIP is assumed to come from new units that have been started
during the period.
Costs carried forward from the previous period are assigned directly to
completed goods

Unit 6-
Theory
Question Process Normal and
costing abnormal
losses and
abnormal gains If there are normal losses, always start with calculating the value of those normal losses first-
before complete and C/WIP units

Example
tables