Append below a illustration of a simple set of process costing where there are merely two processes, without any work-in-process and finished stock account.
| Illustration Of a Simple Process Costing | ||
| Process 1 | Process 2 | |
|
Material |
15,000 |
– |
| Labor | 20,000 | $25,000 |
| Manufacturing expenses | 5,000 | $5,000 |
| 40,000 | $30,000 |
Production for the period is 1,000 unit.
Show the total cost of the finished goods and the process for each phase of the production
Solution:
PROCESS 1
| Units | Cost $ | Units | $ | ||
| 1,000 | Material | 15,000 | 1,000 | Transfer to Process 2 | 40,000 |
| Labor | 20,000 | ||||
| Manufacturing expenses | 5,000 | ||||
| 40,000 | 40,000 |
Average cost per unit=$40,000/1,000=$40.00
PROCESS 2
| Units | Cost $ | Units | $ | ||
| 1,000 | Costs transferred from Process 1 | 40,000 | 1,000 | Transfer to Finished Stock A/c | 70,000 |
| Labor | 25,000 | ||||
| Manufacturing expenses | 5,000 | ||||
| 40,000 | 40,000 |
Average cost per unit=$70,000/1,000=$70.00
FINISHED STOCK ACCOUNT
| Units | Cost $ | Units | $ | ||
| 1,000 | Costs transferred from Process 2 | 70,000 |