Process Costing Flashcards
Why use process costing ?
It is a method of valuing a unit of output.
It gathers all of the costs associated with a particular process and calculates the average cost of a single unit.
How to calculate process costing ?
Cost per unit of output is Input costs + conversion costs ( labour costs, no of man hours x hr rate ) / expected unit of output.
What goes on the DR side of the process account ?
The inputs of the process ( direct labour, paint, overheads )
What goes on the CR side of the process account ?
The outputs (output, normal loss, abnormal loss )
Is a normal loss an expected loss ?
YES
How to work out the cost per unit of output with scrap value ?
Input costing+ conversion costs - scrap value / expected units of output.
Expected units of output is the amount of litres etc, with the % of scrap value removed.
What is a prime cost ?
The direct cost of manufacturing products, before the addition of production overheads.
What is the production cost ?
The factory cost of manufacturing the products, ie prime cost plus production (factory) overheads.
What is the total cost ?
The production cost plus non-production overheads.
What is the marginal cost ?
The total of variable costs of producing a unit of output.
