Process Costing System

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  departments in order to complete the units. The addition of materials has two possible effects on units and costs in process:

  1. The additional materials increase the unit cost, since these materials become a part of the product manufactured, but do not increase the number of final units. For example, in a finishing plant of textile company, the the material added is often a bleach; in a wire company, a plating mixture; in an automobile assembly plant, additional parts. Theses materials are needed to give the product certain specific quantities, characteristics, or completeness; or
  2. The added materials increase the number of units and also cause a change in unit cost. In processing a chemical, water is often added to a mixture, causing an increase in the number of units and a spreading of costs over a greater number.

 

  1. Increase in Unit Cost Due to Addition of Materials
  2. Addition of Materials – Increase in units and Change is Unit Cost
  3. Beginning Work in Process Inventories – Average Costing Method
  4. Cost of Production Report FIFO
  5. Average Costing Method Versus FIFO Costing Method – Process Costing
  6. Difficulties Encountered in Process Costing Procedure
  7. Discussion Questions and Answers
  8. Similarities and Differences between Job Order and Process Costing System

  9. Operation Costing /Hybrid Costing System

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  1. Edgar October 7, 2016

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