PROCESS COST METHOD

A. PENGERIAN PROCESS COST METHOD

Process cost method is a method of collecting production costs through the production
department or cost responsibility centers, which generally applies to companies that produce
products or masses.

B. CHARACTERISTICS OF COST METHOD OF PROCESS

Characters production as follows:
1. Resultant product is a standard product
2. Products produced from month to month are the same
3. Production activities began with the issuance of production orders that contain standard product
production plan for a specific period

C. DIFFERENCES IN PROCESS COST METHOD USING THE COST OF

ORDER
1. collection of production costs
Order cost method to collect the cost of production according to orders, while the cost method
mengumpulka process production costs per production department per accounting period
2. calculation of the cost of production per unit
order cost method calculates the cost of production per unit by dividing the total costs incurred
for certain orders by the number of units of products produced in the respective orders. This
calculation is performed at the time the order is being manufactured. Cost method calculates the
cost of production per unit by dividing the total costs of production incurred during a particular
period by the number of units of product produced during the period in question. This calculation
is conducted at the end of the accounting period (usually the end of the month)
3. classification of costs of production
in order cost method, production costs must be separated into direct production costs and indirect
production costs. The production costs are directly charged to the product based on the actual
costs occur, while production costs are not directly charged to the product based on the tariff
determined in advance. In the method the cost of the process, differentiation direct production
costs and indirect production costs often not necessary, especially if the company only produces
one type of product (such as the company's cement, fertilizers, spices). Because the cost of the
unity of the product is calculated every end of the month, then the general overhead costs
charged to the product on the basis of actual costs occurred.
4. cost elements are grouped in factory overhead costs.
In order cost method, factory overhead costs consist of the cost of auxiliary materials, indirect
labor costs. In this method the overhead costs charged to the product on the basis of tariff
determined in advance. In the process cost method, factory overhead costs consist of production
costs other than the cost of raw materials and auxiliary materials and labor costs (direct and
indirect). In this method the overhead costs charged to cost of products that actually occurred
during a particular accounting period.
D. BENEFITS INFORMATION COST OF PRODUCTION

1. Determine the selling price of products

2. Monitor the realization of the production costs

3. Calculate profit or loss periodic

4. Determining the cost of inventories of finished products and products in the process
shown in the balance

E. METHOD WITHOUT COST CALCULATE process- PRODUCT

INVENTORY PROCESS IN THE BEGINNING
VARIATION EXAMPLE OF USE OF METHOD OF COST PROCESS DESCRIBED IN THIS
CHAPTER INCLUDE:
1. cost method processes applied in companies whose products dioleh only through the production
department
2. cost method processes applied in companies whose products are processed through more than
one production department
3. the effect of the product is lost in the process of the calculation of the cost of production per
unit, assuming:
the product is lost early in the process
proiduk lost at the end of the process

1. PROCESS COST METHOD - PRODUCTS PROCESSED THROUGH THE

DEPARTMENT OF PRODUCTION
Example 1.
PT Risa Rimendi mass processing their products through the production department. Total costs
incurred during January 19x1 presented in figure 3.1
Raw material costs rp 5,000,000
Cost of auxiliary materials rp 7,500,000
Labor costs rp 11.25 million
Factory overhead costs rp 16.125
million
Total cost of production rp 39.875
million
The number of products produced during the month are:
Finished product 2,000 kg
Products in the process at the end of the month, with a completion
rate as follows: Cost of raw materials: 100%; the cost of auxiliary 500 kg
materials 100%, labor costs 50%; factory overhead costs 30%.

Data produced by PT Risa Rimendi January 19x1

Into the process: 2,500 kg
 The finished product: 2000 kg
Products in the final process 500 kg

Calculation of the cost of production per unit

Elements of Total cost unit equivalence Cost of production
production costs per unit
(1) (2) (3) (2), (3)
Raw material rp 5,000,000 2,500 Rp 2,000
adjuvant rp 7,500,000 2,500 3,000
Labor rp 11.25 million 2,250 5000
overhead factory rp 16.125 million 2,150 7,500
39.875 million 17,500

Calculation of the cost of finished products and products in process inventories

The cost of the finished product: 2.000 x Rp 17,500 Rp 35,000,000

Cost of product inventory in the process
Raw material costs: 100% x 500 x USD 2,000 = USD 1 million
Auxiliary materials costs 100% x 500 x USD 3,000 = USD
1,500,000
Labor costs 50% x 500 x USD 5,000 = USD 1,250,000 rp 4.875 million
Factory overhead costs 30% x 500 x rp 7,500 = Rp 1,125,000
Total cost of production in January 19x1 Rp 39.875 million

Journal of recording the cost of production

a journal to record the cost of raw materials;
Goods in raw material costs process- Rp 5.000.000
Inventories of raw materials Rp 5.000.000

The entry to record the cost of auxiliary materials

Goods in process-cost adjuvant Rp 7,500,000
Supplies of rescuer Rp 7,500,000

The entry to record the cost of labor

Goods in-process labor costs USD 11.25 million
Salaries and wages USD 11.25 million

Journal entries for the factory overhead costs

In-process goods factory overhead costs Rp 16.125 million
Various accounts are credited Rp 16.125 million
 The entry to record the cost of finished products are transferred to the warehouse
Inventories of finished products Rp 35,000,000
Goods in raw material costs process- Rp 4,000,000
Goods in process-cost adjuvant Rp 6,000,000
WIP-labor costs USD 10,000,000
In-process goods factory overhead costs Rp 15,000,000

Journal noted the cost of the inventory of products in process unfinished dioleh at the end of
January 19 x1

Inventory of products in process Rp 4.875 million

WIP - the cost of raw materials Rp 1.000.000
WIP - the cost of auxiliary materials Rp 1.500.000
Cost of goods in the labor process- Rp 1,250,000
WIP - factory overhead costs Rp 1,125,000

2. -Product PROCESS COST METHOD OF PROCESSED THROUGH MORE THAN ONE

PRODUCTION DEPARTMENT
The calculation of production costs per unit of product produced by the department after the first
department is a cumulative calculation. Because the products produced by the department after
department first had a finished product from the previous department, which brought the cost of
production of the sebelumnyua production department, the cost of the products produced by the
department after the first department consists of:
a. production costs are taken from previous departments
b. production costs are added in department after department first

contoh2:
PT eliona sari has two production departments remedy menghasilkna product: Department A and
Department B. Data on production and costs of production into two departments for the month of
January 19 x1 presented in pictures following :

In January 19x1 production data

A department Department B
The products included in the process 35,000 kg
The finished products are transferred to the Department of 30,000 kg
B
The finished products are transferred to the warehouse 24,000 kg
Products in the end of the month 5,000 kg 6,000 kg
Costs incurred in January 19x1
Raw material costs Rp 70.000 Rp 0
Labor costs Rp 155.000 Rp 270,000
Factory overhead costs Rp 248,000 Rp 405,000
Completion rate products in the final product
Raw material costs 100%
conversion costs 20% 50%
 Calculation of the cost of production per unit of the department A
Elements of Total cost unit equivalence Cost of production
production costs per kg

Raw material Rp 70.000 35,000 Rp 2

Labor 155,000 31,000 5
Overbead factory 248,000 31,000 8
Total Rp 173,000 USD 15

Calculation of the cost of finished products and products in process inventories dep A

The cost of the finished product: 30.000 x Rp 15 Rp 450.000

Cost of product inventory in the process
Raw material costs: 100% x 5.000 x Rp 2 = Rp 10,000
Labor costs 20% x 5.000 x Rp 5 = 5,000
Factory overhead costs 20% x 5.000 x Rp 8 = Rp 8,000
rp 23,000
A number of production costs in January 19x1 Department Rp 473,000

Journal A recording of the cost of production department

The entry to record the cost of raw materials:
WIP-cost raw materials department A Rp 70.000
Inventories of raw materials Rp 70.000

The entry to record the cost of labor:

In-process goods department labor costs A Rp 155.000
Salaries and wages Rp 155.000

Journal entries for the A departmental factory overhead costs

In-process goods manufacturing overhead department A Rp 248,000
Various accounts in credit Rp 248,000

The entry to record the cost of the finished product is transferred by the department A to
department B:
WIP - the cost of raw materials department B Rp 450.000
Goods in process-cost raw materials department A Rp 60.000
WIP-A department labor costs Rp 150.000
WIP-A departmental factory overhead costs Rp 240,000

The entry to record the cost of inventory of products in process unfinished processed in
department A at the end of the month of January 19x1

Product inventory in the process of departmental A Rp 23.000

Goods in process-cost raw materials department A Rp 10.000
WIP-A department labor costs rp 5000
WIP-A departmental factory overhead costs rp 8000
 Calculation of the cost of production per unit of department B
Elements of Total cost unit equivalence Cost of production
production costs per kg

Labor 270,000 27,000 10

Overbead factory 405,000 27,000 15
Total Rp 675,000 USD 25

Calculation of the cost of finished products and products in process inventories dep B

The cost of the finished product that is transferred to the warehouse

department B
Cost of goods from department A: 24.000 x Rp 15 Rp 360,000
Cost is written by the department B: 24.000x Rp 25 600,000

The total cost of the finished product are transferred to the 960,000
warehouse
24,000 x Rp 40
The cost of product inventories in the final process
Cost of goods from department A: 6,000 x Rp 15 90,000
Cost is written by the department B:
Labor costs 50% x 6.000 x US $ 10 = Rp30,000
Factory overhead costs 50% x 6.000 x US $ 15 = US $ 45,000 rp 75,000
The total cost of the product inventory in the process department B 165,000
Total cumulative production costs in January 19x1 Department B Rp 1,125,000

journals recording the cost of production department B

Journal to record the receipt of product from department A::

WIP - the cost of raw materials department B Rp 450.000
Goods in process-cost raw materials department A Rp 60.000
WIP-A department labor costs Rp 150.000
WIP-A departmental factory overhead costs Rp 240,000

The entry to record the cost of labor:

Goods in process-cost labor department B Rp 270,000
Salaries and wages Rp 270,000

Journal entries for the department and factory overhead costs

In-process goods manufacturing overhead department B Rp 405,000
Various accounts in credit Rp 405,000
 The entry to record the cost of the finished product is transferred by the department B to
warehouse
Inventories of finished products Rp 960,000
Goods in process-cost raw materials department B Rp 360,000
WIP-cost labor department B Rp 240,000
WIP-B factory overhead departments Rp 360,000

The entry to record the cost of inventory of products in process unfinished processed in
department A at the end of the month of January 19x1

Product inventory in the process of departmental B Rp 165,000

Goods in process-cost raw materials department B Rp 90.000
WIP-cost labor department B Rp 30.000
WIP-B factory overhead departments Rp 45.000

3. EFFECT OF THE OCCURRENCE OF PRODUCTS ARE LOST IN THE PROCESS OF

CALCULATION OF COST OF PRODUCTS PER UNIT

Effect of the product lost at the beginning of the process to the calculation of the cost of
production per unit

Contoh3:
PT eliona sari has two production departments remedy menghasilkna product: Department A and
Department B. Data on production and costs of production into two departments for the month of
January 19 x1 presented in pictures following :

In January 19x1 production data

A department Department B
The products included in the process 1,000 kg
The finished products are transferred to the Department of 700 kg
B
The finished products are transferred to the warehouse 400 kg
Products in the end of the month, with a completion rate
as follows:
The cost of raw materials and auxiliary 100% conversion 200 kg
fee 40% 100 kg
Auxiliary materials costs by 60%, the cost of conversion
of 50%
Products are missing at the beginning of the process 100 kg 200 kg

The production cost of the Moon January 19 x1

A department Department B
Raw material costs Rp 22.500 rp -
Cost of auxiliary materials 26,100 16,100
Labor costs 35,100 22,500
Factory overhead costs 45 800 24,750

Calculation of the cost of production per unit of the department of A in January 19 x1

types of fees The number of products produced by A Department of Cost per kg
departemn A (unit equivalence) production costs product
produced by
the department
A
Raw material costs 700 kg + 100% x 200 kg = 900 kg Rp 22.500 USD 25
Cost of auxiliary 700 kg + 100% x 200 kg = 900 kg 26,100 29
materials
Labor costs 700 + 40% x200kg = 780kg 35,100 45
Factory overhead 700 + 40% x200kg = 780kg 46,800 60
costs
USD 130 500 Rp 159

A calculation of the cost of production department in January 19x1

The cost of the finished product are transferred to the Department B: USD 111 300
700 x Rp 159
Cost of product inventory in the end of the month (200 Kg)
Raw material costs 200 kg x 100% x US $ 25 = 5,000
Cost of auxiliary materials 200 kg x 100% x US $ 29 = 5,800
Labor costs 200 kg x 40% x US $ 45 = 3,600
Manufacturing overhead 200 kg x 40% x US $ 60 = 4,800 Rp 19.200
Total production costs Ministry A USD 130 500

Products are missing at the beginning of the process in the Department after the first
department

The calculation of the adjustment cost per unit of the department A

Cost of production per unit of products derived from the department A USD 159.00
Rp 111 300: 700
Cost of production per unit of products derived from the department A USD 222.60
after the product is lost in the process in Department B of 200 kg is
USD 111 300 (700 kg-200 kg)
Adjustment of the cost of production per unit of products derived from rp 63.60
the Department A

The calculation of production costs per unit of Department B in January 19 x1

types of fees The number of Total production costs Costs per kg

products produced were added in were added
 by the department B department B Department B
(unit equivalence)
Cost of auxiliary 400 kg + 60% x 100 Rp 16,100 USD 35
materials kg = 460 kg
Labor costs 400 kg + 50% x 100 Rp 22.500 USD 50
kg = 450 kg
Factory overhead 400 kg + 50% x 100 Rp 24,750 Rp 55
costs kg = 450 kg
Rp 63 350 USD 140

The calculation of the cost of production department and January 19x1

The cost of the finished product are transferred to shed 400 kg @ USD 145 040
Rp 362.60
Cost of product inventory in the end of the month (100 kg):
Cost of goods from department A: 100 kg x Rp 222.6 = US $ 22
260
Cost of auxiliary materials: 100 kg x 60% x US $ 35 = 2,100
Labor costs : 100 kg x 50% x US $ 50 = 2,500 Rp 29 610
Factory overhead costs: 100 kg x 50% x US $ 55 = 2,750
The cumulative amount in department B USD 174 650

Effect of the product that is lost at the end of the process to the calculation of the cost of
production per unit

Example:
PT eliona sari has two production departments remedy menghasilkna product: Department A and
Department B. Data on production and costs of production into two departments for the month of
January 19 x1 presented in pictures following :

In January 19x1 production data

A department Department B
The products included in the process 1,000 kg
The finished products are transferred to the Department of 700 kg
B
The finished products are transferred to the warehouse 400 kg
Products in the end of the month, with a completion rate
as follows:
The cost of raw materials and auxiliary 100% conversion 200 kg
fee 40% 100 kg
Auxiliary materials costs by 60%, the cost of conversion
of 50%
Products are missing at the end of the process 100 kg 200 kg

The production cost of the Moon January 19 x1

 A department Department B
Raw material costs Rp 22.500 rp -
Cost of auxiliary materials 26,100 16,100
Labor costs 35,100 22,500
Factory overhead costs 45 800 24,750

Calculation of the cost of production per unit of the department of A in January 19 x1

types of fees The number of products produced by A Cost per kg

departemn A (unit equivalence) Department product produced
of production by the
costs department A
Raw material costs 700 kg + 100% x 200 kg + 100 kg = 1000 Rp 22.500 Rp 22.5
kg
Cost of auxiliary 700 kg + 100% x 200 kg + 100 kg = 1000 26,100 26.10
materials kg
Labor costs X200kg 700 + 40% + 100 kg = 880kg 35,100 39.89
Factory overhead X200kg 700 + 40% + 100 kg = 880kg 46,800 53.18
costs
USD 130 500 Rp141.67

A calculation of the cost of production department in January 19x1

The cost of the finished product are transferred to the Department B: Rp 99 169
700 x Rp 141.67
Adjustment of the cost of finished products for their product that is lost 14167.00
at the end of the process 100 XRP 141.67
The cost of the finished product are transferred to the department B 113,334.40
after adjustment: 700 x Rp 161.91
Cost of product inventory in the end of the month (200 Kg)
Raw material costs 200 kg x 100% x Rp 22.5 = 4,500
Cost of auxiliary materials 200 kg x 100% x Rp 26.1 = 5.220
Labor costs 200 kg x 40% x Rp 39.89 = 3191.2
Manufacturing overhead 200 kg x 40% x Rp 53.18 = 4254.4 Rp 17.165.60
Total production costs Ministry A Rp 130,500.00

Products are missing at the end of the process in the production department after the first
production department

The calculation of production costs per unit of Department B in January 19 x1

types of fees The number of products produced Total Costs per kg

by the department B (unit production were added in
equivalence) costs were Department B
 added in
department B
Cost of auxiliary 400 kg + 60% x 100 kg + 200 kg = Rp 16,100 USD 24.39
materials 660 kg
Labor costs 400 kg + 50% x 100 kg + 200 kg = Rp 22.500 USD 34.62
650 kg
Factory overhead 400 kg + 50% x 100 kg + 200 kg = Rp 24,750 USD 38.08
costs 650 kg
Rp 63 350 USD 97.09

The calculation of the cost of production in January 19x1 Department B

The cost of the finished product are transferred to the Department B: USD 64764.00
400 x Rp 161.91
Costs are added department B 400 x Rp 97.09 38836.00
Cost of product that is lost at the end of the process: 200 kg (USD 51800.00
161.91 + Rp 97.09
The cost of the finished product are transferred to the department B 155,400.00
after adjustment: 400 x Rp 388.5
Cost of product inventory in the end of the month (100 Kg)
Cost of goods from department A: 100 kg x Rp 161.91 = US $
16191.00
Cost of auxiliary materials 100 kg x 60% x Rp 24.39 = 1.463.3
Labor costs 100 kg x 50% x Rp 34.62 = 1,731 Rp 21.289.40
Manufacturing overhead 100 kg x 50% x Rp 38.08 = 1,904
Total cost of the production department B Rp 176.689.40

F. PROBLEMS EXAMPLE
PT Aquana mem production of mineral water under the brand "Fresh". The company has a
BDP per January 1 200 8 as much as 10,000 liters and in January 200 8 companies process
50,000 liters. At the end of January 200 8 companies have the final BDP 20,000 liters.
Requested: how many liters of finished products during January 200 8?

Answer:

Dg finished product formula is calculated as follows:

BDP supplies early 10,000
Product entry process this period 50,000
Total units processed 60,000
BDP supplies end (20,000)
finished product 40,000