Q5RQ - Horngren'S Financial And Managerial Accounting

Question

Question: Describe the flow of costs through a process costing system.

Step-by-Step Solution

Answer

Answer:

In process costing, the cost is arrived by first adding the direct material cost at the beginning of the process and all the other cost (whether direct labor or overhead) are gradually added over the course of the production process.

Step 1: Process costing system

Process costing system requires to compute the cost of production of the goods at every stage of process involved in production.

Step 2: The flow of cost through a process costing system

Particulars	Amount ($)
Direct cost at process 1	XXX
Add: Indirect cost at process 1	XXX
Add: Direct cost at process 2	XXX
Add: indirect cost at process 2	XXX
Total cost	XXX