Managerial Accounting
July 28, 2015
Process Costing Process costing is used when there is mass production of similar products, where the costs associated with individual units of output cannot be differentiated from each other. In other words, the cost of each product produced is presumed to be alike as the cost of every other product.
Process costing is for companies that produce standardized products in huge quantities. You have to take certain steps in process costing. Process costing involves preparing a process cost sheet.
Types of PC
Weighted average costs. This type supposes that all costs, whether from a preceding period or the present one, are lumped together and assigned to create units. It is the easiest version to compute.
Standard costs. This type is based on typical costs. Its calculation is alike to weighted average costing, but standard costs are assigned to production units, rather than real costs; after full costs are accumulated in regards to basic costs, these totals are compared to genuine accumulated costs, and the distinctiveness is charged to a variance account
First-in first-out costing (FIFO). FIFO is a more complex calculation that builds levels of costs, one for any units of production that were started in the earlier production period but not completed, and another level for any production that is started in the present period. (Horngren, 2010)
Works Cited
Horngren, S. S. (2010). Management Accounting. Retrieved August Sunday, 2015, from prenhall.com: