A separate account is prepared for each stage of a manufacturing process or operation. The cost incurred at each manufacturing stage, process or operation are charged separately. A separate process account prepared for each process is debited by the costs incurred in that process.
Cost of materials, direct labor, direct expenses and overheads constitute the cost of each process. These are the main items used in process account.
* Materials:
Materials are used for producing products. Required materials are issued to the first process. The output of the first process is passed on to the next process. Subsequent process may need additional materials. This process continues till finished products are realized from the final process. The process account concerned is debited by the value of the materials consumed.
Cost of materials, direct labor, direct expenses and overheads constitute the cost of each process. These are the main items used in process account.
* Materials:
Materials are used for producing products. Required materials are issued to the first process. The output of the first process is passed on to the next process. Subsequent process may need additional materials. This process continues till finished products are realized from the final process. The process account concerned is debited by the value of the materials consumed.
* Labor
Payments made to the manpower involved in process work is called labor cost. Thus, wage paid to workmen and supervisors engaged in a process are debited to the particular process account.
* Direct Expenses
Cost of electricity, hire charge of machinery, depreciation of machinery are the costs that are directly attributable to a particular process. The process account is debited by such costs.
* Overheads
The overhead expenses incurred for regulating the central office, logistic support service like store services, cafeteria services, security services etc. are allocated on the basis of the absorption rate.