Successor

Umair Abbas 0031

Umair Ahmad 0042

Ali Mardan Khan 0017

Muneeb Ahsan 0022

Shahid Anwar 0034

Identify The Situation in Which Process

Costing System are Appropriate

There are the following types of Costing system:

Process Costing

Job Costing

Hybrid Costing

Job Costing System

“Distinct, identify units of a product or service”

Example: custom made machines and houses.

Process Costing System

“Masses of identical or similar units of a product or service.”

Example: food or chemical processing.

In Process costing system the unit cost of a product or service is

obtained by assigning total cost to many identical or similar units of output.

In other words, unit costs are calculated by dividing total cost

incurred by the number of units of output from the production process

Formula:

Per Unit Cost = Total Cost/ Number of units of output

Conti……

In Manufacturing process costing each unit received the same

or similar amounts of the following:

Direct Material Cost

Direct Labor Cost

Manufacturing Overhead Cost

Hybrid Costing System

“Costing System that combine elements of both job and

process costing.”

Difference Between Process Costing

and Job CostingJob Costing

Individual jobs use different quantities of production resources.

It would incorrect to cost each job at the same average Production cost.

Example:

In Cloth manufacture different material are use in different batches of cloths, say , wool versus cotton.

Process Costing

Similar units of products or services are mass produced use same quantities of production resources

Process costing is use to calculate an average production cost for all units produced.

Example:

In Cloth manufacture cost per unit of each operation, such as cutting or sewing is identical.

Pacific Electronics manufacture a verity of cell phone

models. These models are assembled in the assembly

department. Upon completion, units are transferred to the

testing department. We focus on the assembly department

process for one model, SG-40. All units of SG-40 are

identical and must meet a set of demanding performance

specifications. The process costing system for SG-40 in

assembly department has a single direct cost category –

direct materials and a single indirect cost category –

Conversion Costs.

Example

Graphic RepresentationConversion cost added

During process

Transfer

Direct material Added

at beginning Of process

Assembly

Department

Testing

Department

I’m ready to processsome leisure time.