Subscribe:

Ads 468x60px

Method and Guidelines for Process Costing

Lost units are always shown with other whole units under “Units accounted for” in the cost of production report.

Continuous Normal Loss
1. Lost units are not extended to EUP schedule.
2. All good production (both fully and partially completed) absorbs the cost of the lost units through higher per-unit costs.

Continuous Abnormal Loss
1. All units are appropriately extended to EUP schedule.
2. Cost of lost units is assigned as a period loss.

Discrete Normal Loss
1. Normal loss is appropriately extended to EUP schedule.
2. Determine whether ending inventory has passed an inspection point.
a. If no, cost of lost units is assigned only to the good production that was transferred.
b. If yes, cost of lost units is prorated between units in ending WIP Inventory and units transferred out based on (1) (weighted average) total costs contained in each category prior to proration, or (2) (FIFO) current costs contained in each category prior to proration.

Discrete Abnormal Loss
1. All units are appropriately extended to EUP schedule.
2. Cost of lost units is assigned as a period loss.

Normal Rework
1. (Actual cost system) Add rework costs to original material, labor, and overhead costs and spread over all production.
2. (Normal and standard cost systems) Include cost of rework in estimated overhead when determining standard application rate. Assign actual rework costs to Manufacturing Overhead.

Abnormal Rework
Accumulate rework costs separately and assign as a period loss.

Accretion in Successor Departments
An increase in units requires that the per-unit transferred-in cost be reduced in the successor department based on the new, larger number of units.
Related Posts Plugin for WordPress, Blogger...