Process costing theory

How does normal loss affect the cost per unit?

Reduce the amount of good output and therefore increase the cost per unit

How are abnormal losses treated in a process account?

Transferred to an abnormal loss account at their scrap value and then the rest is transferred to the income statement

How does normal scrap affect the cost per unit?

Does not affect the cost per unit

How does abnormal loss affect the cost per unit?

Does not affect the cost per unit

When is process costing used?

used in industries where identical units are produced in an identical fashion, usually by mass-production methods

Abnormal loss meaning

More loss in units/weight than thought, this can be due to a fault in machinery, poor workmanship or accidents which means units cannot be used

Difference between scrap and waste?

Scap can be sold at a normal price and are known as normal losses, whereas wastes are usually not sold as people do not want them

Difference between wastage and spoilage

Wastage cannot be sold, whereas spoilage can be sold for a lower price

Work in Progress meaning?

Goods being produced which are not complete by the end of the financial period, When Work In Progress exists a value will be attached to this work and this amount can be deducted from the total value of the process

What industries use process costing?

Mass production

What are the costs of a process known as?

inputs

How is the balance in the process account calculated?

Deducting the credits from the debits