In readiness for the 60th anniversary of the Japanese Cost Accounting Standards next year this article presents the basic concept of waste (e.g. how to calculate in terms of equivalent units), together with related formulas, and this was shown by following the established practice of converting the “Process Cost Component Chart” to the “Equivalent units Chart”.
It then deals with the WIP Conversion Coefficient using an example of crafting a tote bag out of a leather sheet, and highlighted that the practice in the conventional method of setting an upper limit of one (100%) to the progress completion of the E-WIP would lead to erroneous conclusions.
Finally, it revisits the general formula of Process Costing using the FIFO Method of Non-Neglecting Waste and offered an amended version to compute “Costs of Waste arising from the B-WIP”, where the conventional assumption is removed.
The method used in this article is theoretical and deductive construction of academic models based on theories and concepts of cost accounting.
