Process Costing: Equivalent Production – Dani Ki Costing – CA IPCC Video Lectures


Process Costing: Equivalent Production – Dani Ki Costing – CA IPCC Video Lectures

Process Costing: Equivalent Production – Dani Ki Costing – CA IPCC Video Lectures | Process Costing: Equivalent Production – Dani Ki Costing – CA IPCC Video Lectures | Process Costing: Equivalent Production – Dani Ki Costing – CA IPCC Video Lectures | Process Costing: Equivalent Production – Dani Ki Costing – CA IPCC Video Lectures

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Dani Ki Costing
IPCC Video Lectures
Process Costing: Equivalent Production
Lecture 1

Lecture 2
Lecture 3

Lecture 4
Lecture 5

Lecture 6
The End

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Process Costing – Concept of Equivalent Production
In general, process costing is a technique of calculating the cost of a process. It thereby helps to derive at the price per unit. It consists of calculation of normal and abnormal gain and loss. In a continuous process, the output of one process is considered as the input of the succeeding process. Process costing becomes more difficult when joint / by products are produced in a process as costing them individually will be very complicated.
The limitation of simple process costing is that accurate cost cannot be derived in every case in different business because the manufacturing process is not always continued in every concern. So, opening work – in – progress and closing work – in – progress may come into existence whenever there is a break in manufacturing activity, which will thereby break the chain of processes. To overcome this limitation a method called Equivalent Production units will be of great help.
In Equivalent Production Unit, the products which are partly finished are also considered as finished products. Completed units are calculated as a percentage of completion of the process. To display it mathematically Equivalent completed units can be calculated as follows:
Equivalent Production units = (Actual Number of Units in process of manufacture) * (% of work completed)
This can be made clearer with the help of an example. If 100 units are under manufacturing process and the % of work completed on the products under process is 75%, then 75 units will be considered as fully finished goods and costing will be derived on such basis. Different methods are used to calculate the value of work in progress, such as First in first out method, last in first out method and average cost method.


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