# Process Costing-A Simple Illustration(Part2)

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

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