Process Costing

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Hey wonder if someone could help with process costing?<BR>Just a simple formula to remeber to help get me through would be great.<BR><BR>Good luck for tommorrow everyone

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

    I have just revised this. I remeber it in steps.<BR><BR>1 - Calculate the total process cost e.g cost of input (kg x cost per kg) plus the conversion costs e.g labor, overheads.<BR><BR>2 - Calculate the normal loss if applicable - normally expressed in a %<BR><BR>3 - Calculate cost per unit of output - Total process cost/total input less normal loss<BR><BR>4 - Calculate from output units if you have an abnormal loss/gain<BR><BR>Once you have got these figures you can then do you process account.<BR><BR>On the Dr side you need your input and your conversion costs.<BR><BR>On the Cr you need your output units (which will be given) which you then multiply by the cost per unit output which you calculated in step 3, your normal loss which is alway NIL (unless doing scrap) and your abnormal loss which is also valued at cost per unit of output.<BR><BR>If you have a an abnormal gain then this will go on the DR side again valued at cost per unit of putput.<BR><BR>The DR and CR side of the account should balance.<BR><BR>I hope this is clear, I am not that good at trying to explain things<BR><BR>Mel :-)

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