In process costing systems, if the individual order identity is lost and the cost of a completed unit must be computed by dividing total cost incurred during a period by total units completed.
In Process Costing Systems, the summarizing the costs takes place via the cost of production report which is an extremely efficient, economical and time saving device for the collection of large amounts of data.
The entire Process costing systems discussion will be presented step by step. You will understand
(1) The cost of production reports of departments originating products,
(2) Calculation of departmental unit costs,
(3) Costing of work in process, (4) computation of costs transferred to other departments, and
(5) Effect of lost units on unit costs.
The cost reports of departments other than the originating department are also reviewed with emphasis on the costing of closing work in process inventories and the recalculation of preceding department unit costs due to lost units.
In discussion of Process costing systems, we will focus on issues dealt with
(1) special problems involved in adding materials in departments other than the first,
(2) problems connected with opening work in process and
(3) the possibility of using costing methods other than those previously discussed.
We will also focus on issues of the costing of by-products and joint products inasmuch as many industrial concerns using process cost systems are confronted with the difficulties and often rather complicated task of assigning costs to their by-products and /or joint products.