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Topic 6 : Process Costing - Coggle Diagram
Topic 6 : Process Costing
Processing Department
Any location in an organization where materials, labor or overhead are added to the product
The activities are performed uniformly on all units of production
the output is homogeneous
Types of Process
Sequential
units flow in a sequence from one department to another
Parallel
after a point, some units go through different processing departments than others
Equivalent Units
the product of the number of partially completed units and the percentage completion of those units
FIFO
Weighted Average
Makes no distinction between work done in prior or current periods
Blends together units and costs from prior and current periods
Direct Labor
small in comparison to other product
costs in process cost systems
Conversion
Direct labor + Manufacturing
Weighted Average
Analyse physical flow of units
Calculate equivalent units
Calculate unit cost
Analyse total cost
Comparison of weighted average and FIFO
Weighted Average
cost of beginning WIP and equivalent units of work done on WIP are included in the calculation of the average cost per equivalent unit
FIFO
cost per equivalent unit is based only on costs incurred in the current month
Spoilage
cost of defective products and wasted resources that cannot be recovered by rework or recycling
Forms of output
Units completed and transferred out
Spoiled units
Unfinished units remaining in WiP
costed using cost per equivalent unit along with the other two outputs
Types of spoilage
Normal
inherent in the production process and occurs even under efficient operating conditions
Abnormal
should not occur under efficient operating conditions
Operation Costing
hybrid of job-order and process costing