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Unformatted text preview: Chapter 4 Process costing This is a series of activities that are linked to perform a specific objective. Each process or departments have materials, labor, and Manufacturing overhead. Upon completion of a particular job, the cost in each process to be transferred to anther one by adding materials, labor and manufacturing overhead to the process till reaching to the finished goods. The system of process costing is suitable for industries involving continuous production of the same product. Such as producing paper, rubber products, medicines, chemical products. It also very much common in flour mills bottling companies, canning plants. General principles 1- The production activities of the factory are classified by processes or departments. 2- All direct and indirect cost of a particular period is classified by process. Each process account is debited with the amount of direct material, direct labor and with a proportionate part of manufacturing overhead expenses. 3- The total cost of each process is divided by the total production of the process and average cost per unit for the period is obtained 4- When products are processed in more than one department, costs of one department are transferred to the next department as initial costs. The total cost and cost per unit is thus determined by cumulating costs of different departments....
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This note was uploaded on 02/19/2010 for the course ACC 3330 taught by Professor Davis during the Spring '98 term at Texas A&M.
- Spring '98