Die toepassing en beoordeling van proseskoste in Suid-Afrika

Abstract

The basic aim in any process of manufacturing, is to determine the correct cost price of the manufactured product. For this , first of all, a thorough knowledge of cost and secondly, a reasonable technical knowledge of the production process are necessary. In this study of the application of process costing in South Africa, it was found that most cost accountants have an inadequate knowledge of cost. Process costing, as applied in general practice, results in an average cost price. Approximate figures are used and not a cost price. Process cost calculations is therefore based on calculation by division. This simple calculation by division presents no solution for particularization problems in process cost calculation. Furthermore, in process costing historical costs are used in stead of the replacement value. Cost must be calculated according to the replacement value, and the cost price of a unit is built up by the total of the replacement values of the means of production required for that unit. The use of standard cost is an important contribution to calculate the replacement value. Standard cost , when properly used, clearly indicates the determination of efficiency in each process. The standard which can be laid down for each process, can help determine what sacrifices are avoidable and what sacrifices are unavoidable for the process. This presents an opportunity to discover waste and the possibility to avoid the causes of waste. Therefore the use of standard cost in process firms must be strongly recommended. Only sacrifices which are efficaciously employed, form part of the cost price. An inefficacious sacrifice is waste and must therefore not be added to the cost price. It is the duty of the management to combat this in all cost centres. It was also found that some firms persist in using inefficacious costing systems which are not adapted to the requirements of the specific firms. Notwithstanding the cost information available to them, most process firms cannot or do not make efficient use of it . In this dissertation the application of process costing in South Africa was primarily studied. Secondly, problems and defects in process firms were scrutinized. Together with this an attempt was made to indicate more distinct directing principles to calculate a correct cost price. To discuss these problems better, and to promote the objects of this study, the contents of this thesis are classified as follows: In Chapter I the general description and the features of process cost are discussed. In this chapter the process cost system is contrasted to the job cost system. The nature of single and multiple production processes and how a process cost system is planned, are studied. The differences among the terms cost centre, departement and process , are important in a process firm and therefore these terms are distinctly defined. Chapter II deals with process cost procedure. The cost elements are separately described in this chapter. Budgets and standard cost in process firms are also discussed. The production cost statement which forms the basis for the presentation of the cost data, is also separately discussed. The problem of equivalent production and losses in the production process is distinctively discussed. In Chapter III attention is given to the different methods of valuation of work in progress. Specific attention is given to the average cost price and the first -in first-out method, which enjoy wide acknowledgement in practice as well as in costing literature. Chapter IV deals with cost accounting of joint and by-products. The cost

allocation methods of common cost as well as the differences between joint and common costs, are specifically discuss ed . In chapter V the most important considerations and problems found in process firms are discussed. Chapter VI deals with information systems used in process firms. Attention is given to the importance of classification and codefication of accounts as well as the reconciliation of cost accounts with financial accounts.

Accounting systems for standard cost , the cost profit and loss statement, the statement of goods manufactured and sold and the cost audit, are discussed. In Chapter VII an ·example is given (with the aid of various appendices) of the principles and methods described in a process cost system. In this chapter a hypothetical example is used.