9. Process costing

Question 1

What is the difference between specific order costing and continuous order costing?

Answer 1

Specific order costing is identifiable by jobs or batches. Continuous operation costing is produced by sequential processes. i.e. process and service costing.

Question 2

What documents are involved in job costing? (4 stages: stage 3 includes 4 documents)

Answer 2

1. Sales order
2. Purchase order
3. a) goods received note
   b) material requisition
   c) direct labour time ticket
   d) predetermined overheads
4. Job cost sheet

Question 3

When do we you use batch costing instead of job costing?

Answer 3

When the good is homogenous

Question 4

When do you use process costing? What will each process in production have?

Answer 4

When production is continuous. Each production stage will have its own T-account.

Question 5

What is the difference between abnormal and normal loss?

Answer 5

Normal: % of loss expected
Abnormal: loss greater than expected

Question 6

How do you work out the average cost per unit?

Answer 6

Net costs of inputs / expected output

Question 7

How do you work out a loss? (6)

Answer 7

1. Balance the units - the difference is the abnormal loss/gain
2. Value the normal loss at scrap value, if not at £0.
3. Consider the costs
4. Calculate the average cost per unit
5. Value outputs and complete the process account
6. Complete normal and abnormal t-accounts