Download presentation
Presentation is loading. Please wait.
1
Costing Systems (Job, Batch, Service & Process Costing)
AAT Level 3 Costing Systems (Job, Batch, Service & Process Costing)
2
Objectives: Record costing information using a ‘Process’ costing system Define the various stages of inventory
3
Process Costing Outputs Inputs
Used for continuous manufacturing processes Outputs Inputs Cost per unit of output = Input Costs + Conversion Costs Expected Units of Output
4
Process Costing Account
5
What is a Process Costing account?
Dr Process Account Cr Litres Materials - a Output Materials - b Normal Losses Abnormal Losses Labour Overheads Abnormal gains Inputs Outputs
6
Normal Losses (No scrap value)
What you EXPECT to lose during the processes
7
Activity 1 Demo Direct materials 80,000 kg £266,000 Direct Labour
£70,000 Production overheads £60,000 Normal loss 10% Actual output 72,000 Kg
8
Normal Losses (No scrap value) Activity 1
Process Account KG £ KG £ Normal Loss (10% x DM 80000) Materials Labour Output (FG or next process) Overheads Outputs Inputs
9
Activity 2 Direct materials 100,000 kg £300,000 Direct Labour £90,000
£90,000 Production overheads £60,000 Normal loss 10% Actual output 90,000 Kg
10
Normal Losses (No scrap value) Activity 2
What is the normal loss? = Materials KG x % loss = x 10% =10000 KG What is the cost per KG? = Total Costs ÷ Expected Output = ÷90000 =£5 per unit KG £ KG £ Normal Loss (10% x DM ) Materials Labour Output (FG or next process) Overheads Outputs What is expected output? = Materials KG - Loss = =90000 KG Inputs What are the total process costs? = Materials + Labour + Overheads =450000
11
Abnormal Losses (No scrap value)
Avoidable
12
Activity 3 - Abnormal Losses
(No scrap value) KG £ KG £ Materials Normal Loss 5% x Labour & Overheads Abnormal loss Output (FG or next process) Outputs Inputs
13
Your turn! Activity 4
14
Activity 4 - Abnormal Losses
(No scrap value) KG £ KG £ Materials Normal Loss 6% x Labour Abnormal loss Overheads Output (FG or next process) Outputs Inputs What is the cost of 1kg of EXPECTED output? Total Cost ÷ Output ÷ = £5.40 Abnormal loss is 2000kg x £5.40 = £10800 What is the abnormal loss in kg? Expected Output – Actual Output = 2000kg
15
Abnormal Gain (No scrap value)
16
Activity 5 - Abnormal Gain
(No scrap value) What is the cost per kg of expected output? = Total costs ÷ Expected output = ÷ = £3.20 KG £ KG £ Materials Normal Loss 5% x Labour Overheads What is the expected output? = = 17100 Abnormal Gain Actual Output (FG or next process) 56000 What is the abnormal loss/gain? = Actual Output – Expected output = = 400 units What is the value of the abnormal gain? = 400 x £3.20 = 1280
17
Your turn! Activity 6: October Jam
18
Activity 6 Answer Kg £ Materials 5000 5600 Normal Loss 500
Kg Materials 5000 5600 Normal Loss 500 Labour & Overheads 7900 Abnormal Gain 175 525 Finished Goods (or next process) 4675 14025* (*4675 x 3) 5175 14025
19
Normal Losses with Scrap Value
20
Activity 7: January Kg £ Materials 100000 300000 Normal loss 10000
Scrap value = x 1.50 Reduces the cost of the finished goods Kg Materials 100000 300000 Normal loss 10000 Labour 90000 Overheads 60000 Output 450000 15000 435000
21
Activity 7: January Kg £ Materials 100000 300000 Normal loss 10000
Kg Materials 100000 300000 Normal loss 10000 Labour 90000 Overheads 60000 Output 450000 15000 435000
22
Your turn! Activity 8: February
23
Normal Losses (With scrap value) Activity 8
Process Account KG £ KG £ Normal Loss (10% x DM 80000) Materials Labour Output (FG or next process) Overheads Outputs Inputs
24
Activity 9 Demo Abnormal loss with scrap
What’s the difference between EXPECT & ACTUAL Production? Expected – 5000 = Actual Abnormal loss 3000 What’s cost per unit of EXPECTED output? = Total Costs Less Scrap = – = 11.30 Expected Output 45000 What’s the scrap value of NORMAL loss? 5000 x £2 = £10000 5000 10000 120500 3000 33900 41600 42000 474600
25
Your turn! Activity 10
26
Activity 10 - Answer Normal loss is 5%, Scrap Value = 38p per kg.
Materials kg costing £7700 Labour and overheads £3700 Output 9200 kg Kg Materials 10000 7700 Normal loss 500 (a) 190 Labour & Overheads 3700 Abnormal loss 300 (e) 354 Output 9200 10856 11400
27
Abnormal gains with Scrap Value
28
Activity 11 Abnormal gain with Scrap Value
Total the costs MINUS scrap – 180 = £54540 Expected Output = – 900 = 17100 Abnormal Gain = = kg Calculate the cost per unit Total Costs = = !! Rounded to £3.19 Expected Units c) Value the abnormal gains = 400 x = 1276 b) Losses sold for 20p per kg = 900 x 20p = £180 Value the actual output x 3.19 = 55816 180 55816 400 1276
29
Your turn Question 12 NB You will need to add ‘Abnormal Gain’ on the debit side of your account.
30
Activity 12 - Answer Kg £ Materials 5000 5600 Normal loss 500
Kg Materials 5000 5600 Normal loss 500 Labour & overheads 7900 Actual Output 4675 13506 Abnormal gain 175 506 5175 14006
31
More than one process
32
More than one process
33
Your turn! Activity 13
34
Activity 13 -Answer Process 1 Kg £ Materials 200000 100000 Normal Loss
Kg Materials 200000 100000 Normal Loss 20000 Labour Overheads 5000 Output to next process 180000 125000 200000 200000 Process 2 Kg Output from process 1 180000 125000 Normal Loss 20000 Materials 60000 Labour 40000 Output 285000 Overheads 200000
35
Work in Progress Equivalent Units Value of Equivalent Units
Number of WIP units X % Completion Value of Equivalent Units Total Production Costs Completed units + Equivalent units
36
Activity 14: WIP Materials Labour & Overheads
Last month the following inputs were made to a process: Materials £15,575 Labour & overheads £8,480 4000 units were completed and 600 units in progress – 75% complete for materials, but only 40% for labour and overheads. What is the value of completed units and WIP? Units Materials Completed Equivalent Units Labour Completed Work in Progress Total Equivalent Units Costs (Inputs) Cost per EU 4000 100% 4000 100% 4000 600 75% 450 40% 240 4450 4240 15575 8480 3.50 2.00
37
Completed Output Materials 4000 x 3. 50 £14000 Labour 4000 x 2
Completed Output Materials 4000 x 3.50 £14000 Labour 4000 x 2.00 £8000 £22000 Work in Progress Materials 450 x 3.50 £1575 Labour 240 x 2.00 £480 £2055 Materials 15575 Completed Output 22000 Labour & Overheads 8480 Work in progress 2055 24055
38
Your turn! Question
Similar presentations
