Process costing

Abstract

After studying this chapter you should be able to:

• distinguish between process and job costing;

• explain the accounting treatment of normal and abnormal losses;

• prepare process, normal loss, abnormal loss and abnormal gain accounts when there is no closing work in progress;

• calculate the value of work in progress, completed production and abnormal loss using the weighted average and first-in, first-out methods of valuing work in progress;

• recognize that normal losses should be charged only to those units which have passed the inspection point;

• differentiate between the different cost per unit calculations which are necessary for stock valuation, decision-making and performance reporting for cost control.