Process Costing

System
System Posts: 100,534 🤖 Admin 🤖
edited 10:32AM in AAT student discussion
Process Costing

Does anyone have any tips on how to remember the rules for process costing with scrap value.

I am taking ECR in June and then going on to Technician in September so have to get process costing in the ole grey matter!

Eveytime I think I have it when I go back again can;t remeber it!

HELP!!!!!!!!!!!!

Has anyone else taking ECR been told to revise WIP, we only spent 5 - 10 mins on it as lecturer said wont come up but I have seen a few mentions of it on this forum.

Hope revision is going well for everyone out there.

:D

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Process Costing

    accountschic

    There are a lot of points there:-
      If you have an example from work use it, otherwise here is a vague attempt based on a pretend bakery, and another using a cab home from a night club
      "
    Chicbakers" make tasty bread but can't scrape all the mix out of the mixing bowls to put into the bread tins that go into the oven.
      In fact, we expect that 5% of the total mix is wasted, and at the end of each shift this uncooked leftover dough is sold for animal feed
      The total cost of all the loaves produced is the real cost of all the ingredients less the scrap value of the normal loss
    So we use the value of the normal loss as a way of reducing the total cost of the bread produced

    Think of this, 3 friends who live as neighbours call a cab to take them home from a night out:
      We all expect to pay a third of the cab fare, when all of a sudden a vague acquaintance asks if she can jump in with us and jump out when the cab passes her house
      When our vague acquaintance jumps out she hands over a £5 note
      When the three of us get home the cab driver says how much the cab has cost, we then say well take £5 off and divide the remainder three ways

    Process costing is the same approach.
    The "Chicbakers" bakers work out the cost of each loaf of bread by saying
    total cost less the scrap value of normal loss
    and then
    divide this total by the expected production of loaves

    sandy.hood@chichester.ac.uk
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Process Costing

    I do not expect to see a question ask about BOTH abnormal loss/gain AND WIP.

    Both can be tested, but I suggest you will see them in different questions.

    If your tutor has been at a recent Masterclass with Les Nightingale he may have a clue about how he expects to examine the standards.

    I think that as abnormal loss/gain was on the Dec 2006 paper, WIP could be on the June 2007 paper
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Process Costing

    Thanks so much Sandy, it helps sometimes to go back and see it in a basic "form" Sometimes I think we try to look for a more complex way!

    WIP points are very interesting, we spent only 5 mins on this and I must confess I would not have a clue how to anwer these ?'s. Think I will investigate the textbook and workbook further.

    I have read many of your comments on teh site before made to others and you are always helpful.

    Don't know how you find the time with all your lectures.

    Sarah :D

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