1. BPC32603 Topic 4: Process Costing
Instructor:
Ahmad Kaseri Ramin C.A(M), FAIA(UK)
FACULTY OF TECHNOLOGY MANAGEMENT BUSINESS AND ENTREPRENEURSHIP

2. Joint and by Product Costing
TOPIC 4 PROCESS COSTING
Various Costing Model
Service
Costing
JOB / BATCH
COSTING
PROCESS
COSTING
Traditional Costing
Hybrid Costing
Joint and by Product Costing
Operation costing
Advance Costing
ABC COSTING
BPC32603

3. Process costing
Process costing is adopted when there is mass production through a sequence of several processes
Example include chemical, flour and glass manufacturing
It computes the average cost per unit by dividing the costs or production for a particular period by the number of units produced during the period

4. JOB vs PROCESS COSTING
Job costing assigns costs to each individual unit of output because each unit consumes different quantities of resources.
HOWEVER
Process costing does not assign costs to each unit of output because each unit is identical. Instead, average unit costs are computed.

5. Process Costing Systems- Defined
Process costing is a costing system in which the product or service cost is obtained by assigning costs to masses of like units
Conversion costs are costs that are applied uniformly in a department
Materials costs are assumed to be applied at discrete points in the production process
Transferred costs are costs transferred from one department to another department
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6. J OB vs PROCESS COSTING

7. Process Costing System Diagram
Conversion Costs
Material
Costs
Material
Costs
Conversion Costs
Transferred Costs
Testing
Department
Finished
Goods
Inventory
Assembly
Department
Opening balance WIP
Unit Cost completed product
Cost of Good sold
Complete unit cost transferred to next process
Closing balance WIP

8. Direct material
Direct labour
overheads
Process 1
Direct material
Direct labour
overheads
Process 2
Direct material
Direct labour
overheads
Process …n
Finished goods
Cost of goods sold

9. Five Steps in Process Costing
Process Costing Steps
Five Steps in Process Costing
1. Track the physical units of output
2. Determine the number of equivalent whole units
3. Compute the cost per equivalent unit
4. Measure total costs to account for
5. Assign costs to units completed and transferred out of the department and units in ending inventory
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10. Equivalent units of production (EUP)
Equivalent units is a measure of the output of a process costing system
Eg, 60 units 25% complete = 15 equivalent whole units
If there is no opening or closing work in progress (WIP) the unit cost of products can be obtained as follows
Unit cost =
Sum of production costs
Production quantity

11. However, If there is opening or closing work in progress, the partly completed production will have a lower cost than the fully completed production
We have to converted the work in progress into finished equivalent units of production (EUP)

12. EU when no opening balance of inventory
The total production cost for January was RM40,000.
8000 units had been completed and 4000 units wee 50%
complete.
Equivalent units of production
8000 units completed
4000 units were 50% completed 2000
10000
Finished goods =
RM40000/10000 * 8000 = RM32000
Closing work in progress =
RM40000/10000*2000 = RM8000

13. File:BPc32603-process costing exercise.wks
EU if zero OWIP + EWIP
Refer Worksheet A
File:BPc32603-process costing exercise.wks

14. File:BPc32603-process costing exercise.wks
EU with OWIP + EWIP
Refer Worksheet A
File:BPc32603-process costing exercise.wks