Cost Behaviour
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Transcript of Cost Behaviour
Successor
Umair Abbas 0031
Umair Ahmad 0042
Ali Mardan Khan 0017
Muneeb Ahsan 0022
Shahid Anwar 0034
Identify The Situation in Which Process
Costing System are Appropriate
There are the following types of Costing system:
Process Costing
Job Costing
Hybrid Costing
Job Costing System
“Distinct, identify units of a product or service”
Example: custom made machines and houses.
Process Costing System
“Masses of identical or similar units of a product or service.”
Example: food or chemical processing.
In Process costing system the unit cost of a product or service is
obtained by assigning total cost to many identical or similar units of output.
In other words, unit costs are calculated by dividing total cost
incurred by the number of units of output from the production process
Formula:
Per Unit Cost = Total Cost/ Number of units of output
Conti……
In Manufacturing process costing each unit received the same
or similar amounts of the following:
Direct Material Cost
Direct Labor Cost
Manufacturing Overhead Cost
Hybrid Costing System
“Costing System that combine elements of both job and
process costing.”
Difference Between Process Costing
and Job CostingJob Costing
Individual jobs use different quantities of production resources.
It would incorrect to cost each job at the same average Production cost.
Example:
In Cloth manufacture different material are use in different batches of cloths, say , wool versus cotton.
Process Costing
Similar units of products or services are mass produced use same quantities of production resources
Process costing is use to calculate an average production cost for all units produced.
Example:
In Cloth manufacture cost per unit of each operation, such as cutting or sewing is identical.
Pacific Electronics manufacture a verity of cell phone
models. These models are assembled in the assembly
department. Upon completion, units are transferred to the
testing department. We focus on the assembly department
process for one model, SG-40. All units of SG-40 are
identical and must meet a set of demanding performance
specifications. The process costing system for SG-40 in
assembly department has a single direct cost category –
direct materials and a single indirect cost category –
Conversion Costs.
Example
Graphic RepresentationConversion cost added
During process
Transfer
Direct material Added
at beginning Of process
Assembly
Department
Testing
Department
I’m ready to processsome leisure time.