Process Costing Case Study

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Process costing:
Process costing is a method of assigning production costs to expected unit of output. This method is suitable when there is mass production of homogeneous products. Industries in which process costing is widely used include food processing, brewing, textile and oil refining. There are three types of method in processing costing which includes standard cost, weighted average and first in first out method. (Wilkinson, 2013) It is used for the products which go through different processes. Process costing is used to determine the cost of each stage of production since each process gives an output to conduct a finished goods.
For example, Laxmi Foods Company produces a garlic flavoured tomato sauce. Production of the sauce requires
Employees charge their time to specific jobs, which are then assigned to the jobs based on the labor cost of the employees. Overhead. It accumulates overhead costs in cost pools, and then allocates these costs to jobs.
Example: ABC company is a small furniture manufacturing business in Ampang. They received an order for 10 chairs from a customer in Cheras. Total cost for the job was RM 500. How much was the cost per chair?
Answer: RM 500 / 10 = RM 50 per chair

Unit costing:
This unit costing is also known as single costing. It is used in those industries where a single or only a few grades of similar articles are manufactured. Unit or output costing is an important method of costing through which cost per unit is ascertained. The cost per unit of an article is obtained by dividing the total production cost by the number of units manufactured during a given period of time. (Concept, Importance & Components Of Unit Costing, n.d.)
Cost per unit =( Total cost of production)/(Total number of units manufactured)

Example: XYZ restaurant which sells pizza, the total variable cost per pizza is RM 10 per pizza, total fixed cost is RM 5650. If XYZ restaurant sells 10,000 pizzas, then its unit cost would be:
Unit cost= RM 10 + (RM 5650/ 10,000) =RM15.65 per

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