Three Types Of Process Costing

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Word count: 1738 According to (H. 1995), process costing relates essentially to processes where all units are identical. In all contexts of process costing the following principles should be adhered to: (a) All costs, Direct and indirect, incurred during the period are charged to each process so that a total process cost for each is obtained. (H. 1995), (b) The total process cost of each process is then shared equally among all the cost units processed in that process. The basic process costing formula, therefore, is: Cost per unit (CPU) = Total process cost incurred during period Total units processed during period For instance if total process cost incurred in processing 1000 units were £5000, the CPU would be £5000/1000=…show more content…
It is an especially important process for manufacturers like Unilever, and there are several potential costing methods that businesses choose for their simplicity. According to (http://www.accountingtools.com/overview-process-costing) There are three types of process costing, which are: 1. Weighted average costs. This version assumes that all costs, whether from a preceding period or the current one, are lumped together and assigned to produced units. It is the simplest version to calculate. 2. Standard costs. This version is based on standard costs. Its calculation is similar to weighted average costing, but standard costs are assigned to production units, rather than actual costs; after total costs are accumulated based on standard costs, these totals are compared to actual accumulated costs, and the difference is charged to a variance account. 3. First-in first-out costing (FIFO). FIFO is a more complex calculation that creates layers of costs, one for any units of production that were started in the previous production period but not completed, and another layer for any production that is started in the current…show more content…
However it does prove to be effective when followed properly. This budget is prepared by dividing all of a government's operations into decision units at relatively low levels of the organization. Individual decision units are then aggregated into decision packages on the basis of program activities, program goals, organizational units, and so forth. Costs of goods or services are attached to each decision package on the basis of the level of production or service to be provided to produce defined outputs or outcomes. Decision units are then ranked by their importance in reaching organizational goals and

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