Process Costing

Question 1

Abnormal loss

Answer 1

Caused by unexpected or abnormal conditions, such as inferior materials or carelessness by workers.

Question 2

Abnormal loss 2nd paragraph

Answer 2

When abnormal loss occurs a separate abnormal loss account must be opened and the total cost of the abnormal loss charged to it.

Question 3

Industries which use process costing

Answer 3

Chemical works
Oil refining
Paper mills

Question 4

Definition of process costing

Answer 4

Used to find the unit cost of making a product which passes through several processes. It’s used by firms which mass produce identical or standardised products e.g canning,bottling. Commonly use in chemical industry.

Question 5

Features of process costing

Answer 5

• completed output is transferred to stock as a single commodity.
• the product is produced in one single process

Question 6

Normal loss

Answer 6

Is an unexpected loss, and some losses will be scrap while other losses will be waste

Question 7

A normal loss is the loss that….

Answer 7

Is unexpected to occur under normal operating procedures

Question 8

What can normal loss be caused by

Answer 8

Evaporation or off-cuts of material

Question 9

Scrap

Answer 9

Refers to discarded materials which have some recovery value but can’t be used for original purpose

Question 10

Work in progress

Answer 10

Refers to partly finished products