Costing

System
System Posts: 100,534 🤖 Admin 🤖
edited 10:32AM in AAT student discussion
I am having trouble with the costing module. Do you have to use absorption/marginal techniques for job, batch and process costing? In the book it mentions WIP and FIFO techniques for process costing but would you have to do this for batch cosing aswell? For example manufacturing shoes will have WIP won't it? But in the book it only mentions it in relation to process costing. I Also get confused with normal loss and process cosing because wouldn't you also have scap material in batch costing?? :roll:

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Costing
    Do you have to use absorption/marginal techniques for job, batch and process costing?
      Yes. Marginal costing can be applied to all 3 methods.
    In the past the exams have tested your ability to spot those costs to include in a marginal cost of a product (Or batch) and an absorption cost.
      Process costing has only been on the two most recent papers.
    Most exams that test this topic would use the context of an absorption costing environment, but the examiner is keen to not be too nasdty with process costing questions so he may opt for a marginal costing setting.
      In terms of the two types of question that can appear, I would consider that
    - absorption costing more likely where there is normal loss and abnormal gain/loss, but no closing WIP.
    - and marginal costing might be used where the equivalent units are needed because there is a closing WIP

    Also get confused with normal loss and process cosing because wouldn't you also have scap material in batch costing??

    Under process you can treat the value of the scrap as reducing the total cost, and can find a cost per unit by dividing this adjusted cost by the units (or equivalent units) produced. This is a standard cost accounting approach.

    The standards for unit 6 do not go into detail regarding batch costing, but you could treat the cost per unit in a similar way.

    This example is in the context of batch production
    Say the total cost of 100 saleable french loaves was £22.00 and the scrap left over can be sold to someone for £2.00. You could calculate the cost per loaf as £22 - £2 = £20 divided by 100 = £0.20 per loaf

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