Further aspects of costing Flashcards
What must I learn from further aspects of costing? P131
GRAPPLE
G- Gains and losses in process costing
R- record costs info - unit, job , batch, service costing
A - activity levels on unit costs- explain & calculate
P - by product calculation- costs, contribution , reported profits
P - processing costing - cost per unit
L - losses in processing costing
E - equivalent unit - calculate costs
Why must an orgnaisation need to identify a costs of making/providing one unit of product/service ? P132
- set selling price
- direct costs covered
- fixed costs are covered
How are effective selling prices achieved? P132
achievable forecasts = sensible demand levels
What does forecasting costs require? P132
understanding:
* quantities of inputs + average costs of inputs & their behaviour
What principle does forecasting unit costs use?P132
- Marginal costing principles - variable oor fixed
- semi variable costs = constituebt elements
- fixed costs - reviewed - step fixed andc increase in value
- discounts = activity iincrease = variable costs of a unit may fall
What must you when yoou’re forecasting costs at different activity levels?P133
- Reasonableness check
- costs per uni is significantly different = calculation error
How do some organisations undertake work? P136
Specific needs of a customer
What must the price for job costing cover? P136
- Cost incurred
- as well as making a profit
What is job costing usually used in conjunction with? P136
Absorption costing
How does an organisation keep records of indiviual jobs for job costing ? P136
Job sheets - costs invoolved + mark up for profit
How are control of costs kept in job costing? P137
- Actual costs compared to budgeted costs
- differences = identified quickly & corrective action taken
What is batch costing ? P138
Identical items as batch
How is costs per bAtch calculated? P138
total costs incurred (estimated) / number of batches produced = cost per batch
How is the cost per unit calculated in batch costoing ? P138
Total batch cost / number of units in batch = cost per unit
Why are batchh numbers used ? P138
- Variation in materials
- Customer requires more than one unit - items that mmatch
- products sold recalled - use of batch number
What is service costing ? P138
- Calculating the cost of service provided
- costs per unit = service offered
- laboour = majority of cost of service & overheads
What is process costing ? P139
- Valuing unit of output
- result of one or more stages of production
What process requires process costing ? P139
Continuous process
How are units treated in process costing and how is the cost pper unit calculated? P139
- Units are identical
- total costs ( material , labour , and overheads) / number of units pproduced
How are materials converted into output ? P140
Conversion costs
How are all the costs of a particular process gathered ? p140
- process account
- more than one process = more than one accout
Where are material and conversion costs all entered into on the process account ? P140
Debit side
Where is the output entered on the process account ? P140
Credit side
How is the process account different from the normal ledger account ? P140
- records quantity of materials
- records the unit costs
- records the total costs
- quantities & total coosts must balance
How do you calculate the costs of oone unit of output under processing costs ? P141
Total process costs incurred / number of uniuts produced = cost per unit
What is a normal llooss ? P143
Expected to occur
How do losses occur and what does this impact ? P143
Output not the same as input
Evaporation and wastage
impacts valuation of cost per unit
Where is a loss processed on the process account ?
- Credit side
- waste product = potential proceeds
- evaporation = no proceeds
Where is a loss processed on the process account ? P143
- Credit side
- waste product = potential proceeds
- evaporation = no proceeds
How are no proceeds from a normal loss recorded in a process account ? P143
- Zero
- Total costs / actual output quantity = cost per uunit
How shoould the credit side of the process account appear once the calcualtion has been made for normal loss ? P144
- Kgs annd total cost still balance
- unit costs increase = total cost spread over fewer units of output
Why dooes the cost per unit need to be amended for waste products? P144
incorporate reduction in cost - proceeds of the sale
Why does the number of units need to be adjusted for waster producs ? P144
Reflect lower quanntity of production
What is the calculation for the cost per unit under on output credit side kf process account? P144
Total input cost - scrap value of normal loss / expected units of output = cost per unit
What is an abnormal loss ? P145
Actual output lower
Where is abnormal loss recorded and how is it valued ?
Credit side of process account
cost per unit
How is the costs per unit calculated in relation to abnovrmal loss ( might need to check again ) P146
cost per unit = output cost per unit
How should the credit side of the process account apppear after abnormal loss P146
Columns for kg and total costs balance
What are the steps for process costing ? P149
Step1 - inputs on debit
Step 2 - normal loss - credit side
Step 2 - output - credit side
Stpe 4 - total value of input - scrap value/ expected output quantity = unit cost of output
step 5 - balance off = credit side ( abnormal loss) / debit side (abnormal gain) - same unit costs as output
What are work in progress within process costing ? P149
- only partly complete
- e.g. complete material and incomplete labour
What is the adjustment for work in progress within process costing called? P150
Equivalent units
How are equivalent units calculated? P150
number of units in progress * degree of completeness = opening wip equivalent units
Started and finished equivalent units identified
Closing wip units * degree of completeness = closing wip equivalent units
Opening + starting and finish + closing = equivalent units
What is the cost per unit calculation within process costing when work in progress is taken into account ? P150
Total cost of productuion/ equivalent units of output = cost per equivalent unit
What do the equivalent unit calculations need to take account of ? P150
- opening work in progress
- closing work in progress
- number of units started and completeed
What does the equivalent unit calculation consider with the opening balance? P151
- remaining balance to be completed
- e.g. 20 % complete for labour = 80% left to be completed
- opening WIP units * 80% = amount within that’s left to be completed
What does the equivalent unit calculation consider with the closing balance? P151
- Amount already completed
- e.g. 20% complete for labour
- opening WIP units * 20% = amount that has been completed
Can equivalent unit calculations apply for direct materials ? P152
- Yes
- beginning of a process
- labour incurred throughout process
What do the bookkeeping entires for process costing include? P152
- Transfer:
- the losses
- gains
- output
- from process costing account
How is a production overheads account used ? P152
- Control account
- Overheads - transferred to work in progress
- Under/ over abosprtion - transferred to P/L
What is the double entry for inputs into the process ? P152
Debit : process account
Credit process account - mmaterials , labour , direct expenses , production overheads
What is the double entry for normal loss with scrap sales? P152
Debit: normal loss account
credit : process account
Double entry for abnormal loss ? P152
Debit - abnormal loss account
Credit: Proces account
What is the double entyr for abnormal gain ? P152
Debit - process account
Credit - abnormal gain account
What is the double entry for output ? P152
Debit - finished gooods account
Credit - proces account
