What Is a Process Cost Worksheet in Accounting?
Process cost is an accounting term for the direct and indirect costs of manufacturing items. It is typically used by companies that mass-produce large batches of similar items. A process cost worksheet breaks down the costs for managers or accountants to review.
Other People Are Reading
-
Direct and Indirect Costs
-
Process costing measures direct costs, such as the labor and raw materials involved in making something. It also includes indirect costs, such as the fraction of executive salaries or building maintenance that should be billed to the project.
Why Process Costing Matters
-
Seeing what the cost per item is and where the costs come from can tell management how much profit they're making per item. That can tell them whether they need to cut the process costs or to raise the item price.
-
Who Uses Process Costing?
-
Process costing works for companies that constantly churn out identical product, such as cereal, bread, automotive parts, nails, refined oil or mail-order catalogs. It doesn't work for companies that produce individual, made-to-order items.
The Worksheet
-
A worksheet will breakdown process costs by the number of units produced, sold and held in inventory; by the cost of labor and materials; and factors such as overhead and depreciation of the inventory.
Department Breakdown
-
A worksheet can breakdown process costs by departments, for example assigning costs to not only making the items but packaging as well.
-
References
Resources
- Photo Credit accounting calculator over the hundred dollar bank notes image by Elnur from Fotolia.com
