Process Costing

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Information about Process Costing
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Published on October 21, 2008

Author: aSGuest1588

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PowerPoint Presentation: Process Costing Presented by: M. Ramzan Roll No. W-588140 PowerPoint Presentation: There are two main types of cost accounting systems. Companies select a method that best matches the flow of work in their business. These methods are used to allocate all production costs: labor, materials and overhead. Job order costing - work is broken into jobs; each job is tracked separately. Process costing - a large quantity of identical or similar products are mass produced. Process Costing: Process Costing Process costing is a type of operation costing which is used to ascertain the cost of a product at each process or stage of manufacture. It is a method of allocating manufacturing cost to products to determine an average cost per unit. It traces and accumulates direct costs , and allocates indirect costs , through a manufacturing process. Costs are assigned to products, usually in a large batch, which might include an entire month's production. Eventually, costs have to be allocated to individual units of product. Alternatively, Job costing can be used to track the flow of costs. Examples of industries using Process Costing include:: Examples of industries using Process Costing include: Bottling Pharmaceuticals Cement Paint Coal Distilleries Electricity Ice Soap Sugar Chemicals Cooking oil Electric appliances Flour Natural gas Petroleum Products Rubber Steel Textile. PowerPoint Presentation: Direct materials Work in Process Account Work in Process Account DEPT. A DEPT. B Factory Overhead Direct Labor to Finished Goods Process Costing System Factory Overhead Direct Labor Physical Flows for a Process Manufacturer: Physical Flows for a Process Manufacturer Scrap Metal Materials Melting Department Casting Department PowerPoint Presentation: Molten metal transferred from Melting To finished goods Casting Department Melting Department Physical Flows for a Process Manufacturer UNITE NO. 3 SARGODHA ROAD, FAISALABAD: Case Study UNITE NO. 3 SARGODHA ROAD, FAISALABAD AMTEX HISTORY: AMTEX HISTORY Amtex journey originally began three decades ago as a weaving unit, entered in international market in 1993 and experienced exponential growth to date by touching a milestone of total annual turn over of $ 200 Million. A team of Over 15000 professionals is ready to serve the clients in the best possible manner. Such mega growth is indicative of sheer dedication showed by the management of the mills the clients as well as to their employees. CORPORATE VISION & MISSION : CORPORATE VISION & MISSION Our aim is to become the buyer's first choice all around the world. To achieve this target we make sure that we stay true to the highest standards of excellence and customer's satisfaction. Our vision is to provide our customers with just the one venue to supply all their requirements. DIVISIONS: DIVISIONS Spinning Weaving Processing Design and Creation Embroidery Stitching INTRODUCTION TO STUDY: INTRODUCTION TO STUDY Cost per unit produced is the average cost, which is calculated by dividing the total process cost by number of units produced. The sequence of operations or process is specific and pre determined. Some loss of material in process (due to chemical action evaporation etc) is unavoidable. Processing of raw material may give rise to the production of several products these several products produced from the same raw material may be termed as joint products or by-products. OBJECTIVE OF STUDY: OBJECTIVE OF STUDY 1. To understand the process of manufacture 2. To study of input output of each process. 3. To find out cost of each process. 4. To find out normal and abnormal wastage. TOWEL MANUFACTURING PROCESSES: TOWEL MANUFACTURING PROCESSES 1) Doubling process 2) Reeling process 3) Dying process 4) Winding process 5) Warping process 6) Weaving process 7) Stitching process 8) Inspection and packing process PROCESSES AND COST CALCULATIONS: PROCESSES AND COST CALCULATIONS Process 1 Doubling Process : Process 1 Doubling Process Firstly the yarn is purchased from the market after then it is proceed to processes into doubling process, which is required for actual towel production. In actual production, single yarn is not so important that’s why it is proceeds into single yarn by doubling process. Started in Production: 1000 units @ 10 = Rs. 10,000 Cost Added by the Department Material = Rs. 500 Labour = Rs. 200 FOH = Rs. 300 Total cost = Rs. 11,000 Unit completed and transferred to next department = 900 units Normal Loss 10% = 100 units Process – 2 Reeling Process: Process – 2 Reeling Process After doubling process, reeling process is proceeds. In this process, yarn is wound on wrapper bobbins then transfer into reeling process. Cost calculation: Started in Production with = 900 @ 12.22 = Rs. 10,980 Cost Added by the Department Material = Rs. 1500 Labour = Rs. 200 FOH = Rs. 300 Total cost = Rs. 12,980 Unit completed and transferred to next department = 800 units Normal Loss 10% = 90 units Abnormal loss = 10 units Process-3 Dying process: Process-3 Dying process After reeling process, dying proceeds. In this process, yarn is dipped completely in the oil. Then it is bleached this bleached yarn is dries in sunlight and then bleached yarn put into the color and again dried in the sunlight. Cost is being calculated as in preceding process Process-4 Winding process : Process-4 Winding process The yarn is wound on wrapper bobbin and cone respectively to provide a wrap for weaving the towel. Cost is being calculated as in preceding process Process-5 Warping process: Process-5 Warping process From the wrapper, bobbins, a wrapper beam is prepared which is a input for the looms. Sizing and starching of the wrap, threads are not required. Cost is being calculated as in preceding process Process-6 Weaving process: Process-6 Weaving process The wrap beam is ready to weave towel on the loom. The actual insertion of threads is controlled by the Jacquard cards, which are set up as an attachment above each loom. Cost is being calculated as in preceding process Process-7 Stitching process: Process-7 Stitching process After completion of weaving process. The output is sent for stitching process. In this process, towels pieces are stitched one by one. Process-8 Inspection and packing process: Process-8 Inspection and packing process After manufacturing of the towels, all the towels are inspected for the quality and after inspection, towels are sent for packing. On completion of all processes the following units are produced and the cost calculation is a under:- Unit started in Production = 500 @ 50 = Rs. 25,000 Cost Added by the Department Material = Rs. 2000 Labour = Rs. 200 FOH = Rs. 300 Total cost = Rs. 28,000 Unit completed and ready for sale = 500 units @ 56

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