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\u00a0<\/span><\/p>\n \u00a0<\/span>\u00a0<\/span><\/b><\/p>\n The cost accounting system used by process is called process costing. <\/span><\/p>\n To prepare bread, we need mixing of white flour, ghee, sugar, eggs, baking powder etc.<\/span><\/p>\n From this mixture, different size of bread can be prepared. <\/span><\/p>\n These sized are baked in oven. <\/span><\/p>\n Baked bread cut and packed. <\/span><\/p>\n \u00a0<\/span><\/p>\n Process costing is applied in the oil refinery, chemical, timber, textile, sugar mill and food processing industries. <\/span><\/p>\n These companies set the right prices for their products and determine whether costs are tracking in line with forecasts. <\/span><\/p>\n \u00a0<\/span><\/p>\n A separate process account is prepared for each process. <\/span><\/p>\n Materials, labour, overhead, machine expenses etc are debited in each process. <\/span><\/p>\n Process costing helps to determine the cost of their products at each stage of the process of manufacturing. <\/span><\/p>\n It helps to control costs, evaluate performance and check the products at each stage. <\/span><\/p>\n \u00a0<\/span><\/p>\n \u00a0<\/p>\n Click on the photo for FREE <\/span><\/b>e<\/span><\/b>Books<\/span><\/b><\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n With process costing, company tracks the flow of costs from department to department, rather than tracking costs for each individual item. <\/span><\/p>\n Each department adds direct labour and manufacturing overhead costs, plus the cost of any raw materials it uses. <\/span><\/p>\n Company may use separate work-in-process inventory accounts for each department or stage in the process.<\/span><\/p>\n <\/p>\n \u00a0<\/span><\/p>\n \u00a0<\/p>\n \u00a0<\/span><\/p>\n \u00a0<\/span>\u00a0<\/span><\/p>\n In process costing <\/span><\/p>\n There are three types of process costing to calculate costs.<\/span><\/p>\n They are weighted average costs, standard costing and first-in first-out (FIFO). <\/span><\/p>\n \u00a0<\/span><\/strong><\/p>\n Weighted average costs<\/span><\/strong><\/p>\n It is the simplest method of calculating cost. <\/span><\/p>\n Company adds all costs for the current process and finds out total cost.<\/span><\/p>\n Total cost is divided by the total number of output units.<\/span><\/p>\n Weighted average costs<\/span><\/strong> <\/b>are used where cost fluctuations from period to period.<\/span><\/p>\n \u00a0<\/span><\/strong><\/p>\n Standard costs<\/span><\/strong><\/p>\n Instead of actual costs, standard costs method uses an estimated standard cost for each process. <\/span><\/p>\n The estimated costs are compared to actual costs after a production run is finished.<\/span><\/p>\n The difference between actual cost and standard cost is charged to a variance account.<\/span><\/p>\n This method is too difficult and time-consuming to collect current information about the actual costs. <\/span><\/p>\n Therefore, the company typically uses this method.<\/span><\/p>\n \u00a0<\/span><\/strong><\/p>\n First in, first out (FIFO)<\/span><\/strong>\u00a0<\/span><\/p>\n FIFO is the most complicated process costing approach. <\/span><\/p>\n FIFO is used to obtain more precise product costing, especially in situations where costs change significantly from one period to the next. <\/span><\/p>\n The uncompleted product (work in progress) and current process products are calculated together.<\/span><\/p>\n FIFO assumes that work in progress at the beginning of the current period are to be completed first. <\/span><\/p>\n \u00a0<\/span><\/p>\n \u00a0<\/span><\/p>\n \u00a0<\/span><\/p>\n ###########<\/span><\/p>\nProcess Costing <\/span><\/b><\/b><\/h2>\n
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Cost Flow in Process Costing<\/span><\/b><\/h3>\n
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<\/p>\nTypes of Process Costing<\/span><\/b><\/h3>\n