Process Costing

Process Costing

1. Normal Loss

   • Expected Loss, sometimes has a scrap value. DEBK is CR Process Account and DR ?Normal Loss

2. Abnormal Loss

   • Valued at finished goods cost per unit
     • DEBK is CR Process Account, DR Abnormal Loss acoount or Abnormal Loss/Gain Account
       • If scrap sales, CR Abnormal Loss DR Receivables
         • Balance on Abnormal Loss or Abnormal Loss/Gain account is transferred to the Income Statement
   • Inefficiencies have occurred in the process

3. Abnormal Gain

   • Valued at finished goods cost per unit
   • DEBK is DR Process Account, CR Abnormal Gain acoount or Abnormal Loss/Gain Account
     • If scrap sales, DR Abnormal Gain with the value of normal losses in scrap NOT generated so cannot be sold CR Normal Loss with this amount
       • Balance on Abnormal Gain or Abnormal Loss/Gain account is transferred to the Income Statement
   • Efficiencies have occurred in the process

4. Work in progress valuation

   • FIFO
     • Units started and completed during the month need to be calculated:
       • [OWIP + Units during the period/previous process - CWIP] - OWIP
         • Finished Goods valuation will equal OWIP and Units started and finished
   • AVCO
     • Simpler than FIFO
       • Finished Goods need to be calculated if not given in the question
         • OWIP + Units during the period/Previous process - CWIP