Learning Objective: Prepare the format of cost of production report. Calculate equivalent units of production. What is the treatment of normal and abnormal loss in process costing system? How the timing of normal and abnormal loss is considered in a cost of production report?
Process Costing System Definition: Process costing system is a costing system used in those manufacturing situations where a single, homogeneous product (such as cement or flour) is produced for long periods of time.
Process Costing System – Case Study: Case A. Accounting for Spoiled Units: The House Hold Aids Company assembles clip clothespins in three sections, and uses process costing. Under normal operating conditions, each section has a spoilage rate of 2%. However, spoilage can go as
Process Costing System Addition of Materials, Average and FIFO Costing After studying this chapter you should be able to: In numerous industries, all materials needed for the product are put in process in the first department. However, additional materials might be required in subsequent
Process Costing System: After studying this chapter you should be able to: Define and explain process costing. Explain the uses of process costing system. Explain the advantages and disadvantages of Process Costing System? Definition and explanation of process costing system: Cost accumulation procedures used
Procedures for Materials, Labor, and Factory Overhead Costs Accumulations: In process costing, materials, labor, and factory overhead costs are accumulated in the usual accounts, using normal cost accounting procedures. Costs are then analyzed by departments or processes and charged to departments by appropriate journal
Principles of Management Definition: Principles of management are fundamental rules of management that could be taught in schools and applied in all organizational situations. Fayol’s 14 Principles of Management: Division of work: Specialization increases output by making employees more efficient. Authority: Managers must be
Pricing Products and Services: After studying this chapter you should be able to: Compute the profit maximizing price of a product and service using the price elasticity of demand and variable cost. Compute the selling price of a product using the absorption costing approach.
Cash Discount Definition: It is an allowance or deduction allowance by a creditors to a debtor. In other words, cash discount is an allowance made by the supplier or creditor when the purchaser pays his account at once or within the period of credit
Purchase of Productive Materials: Learning Objective: Explain the procedure of purchasing productive materials. The actual purchase of all materials is usually made by the purchasing department headed by a general purchasing agent. In some small and medium size companies, however, department heads or supervisors
Purchase Day Book: Learning Objectives: Define and explain purchases day book. What are the ruling and posting of the purchases book? Prepare a purchases day book or Sales day book. Definition and Explanation: Purchases book or purchases day book is a book of original
Prime Cost Definition: Prime cost is equal to total direct materials cost plus direct labor cost. Formula of prime cost can be written as: Prime cost = Direct materials + Direct labor Relevant terms: Conversion cost Total factory cost
Prevention Cost Definition: Prevention costs are those costs that are incurred to keep defects from occurring.
Cash Flow Statement Definition and Explanation of Cash flow statement: The purpose of the statement of cash flows is to highlight the major activities that directly and indirectly impact cash flows and hence affect the overall cash balance. Managers focus on cash for a
Cash Flow Statement Example – Direct and Indirect Method: Unlike the major financial statements, cash flow statement is not prepared from the adjusted trial balance. The information to prepare this statement usually comes from three sources: Comparative balance sheets provide the amount of the
Preference Decision Definition: Preference decision is a decision as to which of several competing acceptable investment proposals is best.
Predetermined Overhead Rate Definition: Predetermined overhead rate is a rate used to charge overhead cost to jobs in production; the rate is established in advance for each period by use of estimates of total manufacturing overhead cost and of the total allocation base for