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Know the Types of Cost Accumulation in Process Costing

by Dec 1, 2017Homework Answers

Cost Accumulation in Process Costing Homework Answers

Today top companies attach themselves to not only products but, data of the business which represents the model of business. Corporate firms create their image in the market with recorded data and information deduced from the sensitive data. Cost accumulation in process costing homework answers says that by gathering the small amount of data every day, financial expert predict the next five years of the company. Here this written piece will throw the light upon cost accumulation and process costing types.
Before we get to know about process costing and types of it, understanding of cost accumulation is required.

What is cost accumulation in accounting terms?

In the business, collection and maintenance of the database for operational expenses are referred as cost accumulation. Cost accumulation combines the two types at the fundamental level.

  • Job order costing cost accumulation process
  • Process costing for cost accumulation process

Job order costing accumulates the expense upon a batch or particular job. It is calculated when there are different types of jobs involved in a batch. An example of job order can be construction job where expenses are calculated based on particular type of structure.
Process Costing accumulates the expense in the database of account at the time of mass production of identical products. Manufacturing of chocolate can be one of the examples of process costing usage in the firm. Cost accumulation in process costing homework answers will discuss the types of process costing here in details and everything related to it.

Process costing in manufacturing environment

Process costing technique involves determining the total cost of all products and production areas the product is passing through for several processes.
For example, there is a company ABC which produces chocolates. The company gets orders from different clients and orders differ in size, thickness, label colour, text formation on chocolate and so on.
Accounting manager has to find the price of unit cost and cost per product to record the finances efficiently that the data can be used in future, to calculate the cost of certain types of 10,000 chocolates. This way it can help to predict the expense as accurately as possible.
Cost accumulation in process costing homework answers gives the best explanation of this concept so that it can be understood by applying practical scenarios and used in enterprises to manage their finances effectively.
In process costing, each and every unit is similar or identical in one or other way. It is mainly used in the manufacturing department where mass production is done. This is because one unit will be same as all the units at that time.
Examples of manufacturing departments which use process counting in their financial records.

  • Food processing factories such as a chocolate factory, garlic bread manufacturing, and packaging factory.
  • Oil and petroleum refineries where gallons of liquid is processed from several machines.
  • Stationery product manufacturing department, where each pencil in the packaged box is similar, staple pins manufacturing factory and so on.

The list can go on. But, here I would like to discuss the scenario from personal experience where the process costing used to calculate the finances of the firm.
Suppose there is a manufacturing bakery where mini lava cakes were made, decorated and packaged in bulk. Hundreds of people worked there with large machinery in fast pace environment.

  1. The production lines were divided based on the type of process.
  2. One team for pouring liquid for lava cake. And arranging them on next line.
  • Another team was responsible for the process of flipping them and putting nuts on them.
  1. Next line people were interested in examining each cake and packaging it while discarding the odd ones from the production line.
  2. Next in line is box packing in a batch and shipping them to refrigerator area.

One big product was divided into a small process of manufacturing.
The output calculation was done on every hundred pieces of cakes or says a box of cake.

  • Cost of each process line
  • People per lane
  • Wastage per one hundred cakes
  • Time is taken to produce one hundred cakes

Bearing in mind the all listed things, the manager noted the data to determine the price. It could differ from time to time and based on working people. The most accurate price can be calculated with the help of process costing and cost accumulation in process costing homework answers.

There are mainly three types or steps to follow in process costing.

  • Total cost per process
  • Unit cost per process
  • Overall charge of process

Let’s understand each of them in details.

  • Total cost per process in process cost for cost accumulation

This type derives the number of products passing through each operational area, in the decided period of time.
An elaborated example of lava cake production can help us to know how this works.In this type, cakes pass through packaging lane. And in one hour of time, how many cakes are packaged (just the operation of packaging) will be calculated to give the total cost per process.

  • Unit cost per process in process cost method

This type will determine the unit cost by dividing the total cost per process by a number of products passed within decided time frame.
Suppose, there are 6000 lava cakes packaged in an hour then, 6000 will be divided by 60 minutes.

  • Overall charge for process cost

Unit cost gives the price of each unit passed under one process, and overall charge receives the unit price for all the processes in line of production. This gives the appropriate price or cost for each product.
Overall cost then combined with other expenses and company can decide the profit on each order for future price estimation purposes.
Cost accumulation in process costing homework answers explains here the types of calculation used in process costing of cost accumulation so that it helps you to record the operational cost in the database for the firm. It is important to note each piece of data accurately so that it can be helpful to create a success graph for the enterprise. Process costing method also helps manufacturing department to receive accurate orders and deliver them within the timeline.