Learning Unit 8 - Process Costing

Question 1

What is process costing (CIMA definition) (POMA Pg 222)

Answer 1

The costing method applicable where goods or services result from a sequence of continuous or repetitive operations or process. Costs are averaged over the units produced during the period.

Question 2

What is the unit cost formula?

Answer 2

Unit cost = Total cost / total number of units

Question 3

What is the statement of equivalent production? (POMA 223)

Answer 3

The statement of equivalent production is used to calculate the average cost of producing one unit during the period.

Question 4

What is the unit cost statement?

Answer 4

The units costs statement calculates the average cost of producing one unit during the period.

Question 5

What is the production cost statement? (POMA 223)

Answer 5

The production cost statement reconciles the costs allocated to units during the period with the costs of production during the period.

Question 6

What are normal losses? (POMA Pg 229)

Answer 6

Normal losses are expected or anticipated losses during the manufacturing process when the process is running according to plan.

Question 7

What are abnormal losses?

Answer 7

Abnormal losses are when the actual losses are more than the expected losses.

Question 8

How are abnormal losses/(gains) treated / disclosed

Answer 8

Abnormal losses are written off as period costs.

Abnormal gains are recorded as revenue in the costing income statement.