2. Sequence of continuous or repetitive
operations or processes.
Determine the cost per unit of product where
identical product is produced for all
customers.
It is not possible to readily identify specific
quantities of input with each unit of output.
3. Outputs produced are homogenous.
Production process is carried on in different stages having a
continuous flow.
Output is uniform and all units are identical
Input will pass through 2 or more processes.
Output of each process becomes input for the next process
until the final product is obtained.
The output of each process may be saleable to generate some
profits.
The input of a process may be acquire from outside sources.
4. Same basic purpose: to calculate unit cost.
Same manufacturing account.
The flow of costs through manufacturing
account is basically the same.
Similari
ties:
5. JOB ORDER COSTING PROCESS COSTING
Each job is different All products are identical
Costs are accumulated by
job
Costs are accumulated by
department
Costs are captured on job
cost sheet
Costs are accumulated on a
department production report
Unit costs are computed
by job
Unit costs are computed by
department
Differen
ces:
6.
7. Dr. Work In Progress
Cr. Raw Material Inventory
Cr. Factory Labor
Cr. Manufacturing Overhead
8. Dr. Department (which is related)
Cr. Work In Progress
Dr. Finished Goods Inventory
Cr. Department (which is related)
9. Dr. Cost of Goods Sold
Cr. Finished Goods Inventory
Dr. Accounts Receivable/Cash/Bank
Cr. Sales
10. Units in the beginning inventory
Units started, or transferred-in, during the
month
Units started during the current month and
finished during the current month
Units completed
Units in the ending inventory
Spoiled or lost units
11. Unavoidable losses due to the nature of the material or
process.
The quantity of normal loss anticipated is determined from
past experience and material specification. The cost is
absorbed by the completed output.
The value of scrap of normal loss units is deducted from the
direct material cost.
Normal loss never receives a share of the process cost.
12. Credit the quantity of loss in process account
Deduct the scrap value from process cost
Open a Normal Loss account:
Dr quantity and value of loss
Cr Process Account (scrap value)
• Has Scrap Value
13. No normal loss expected or loss in excess.
It is treated as an expense.
Dr. Abnormal Loss Account
Cr. Process Account
Has potential scrap value:
Dr. Bank/Cash
Dr. Income Summary
Cr. Abnormal Loss
14. Actual loss is less than the expected loss.
Debited to process account and valued
exactly as the same cost per unit of output
transferred.
15. Equivalent units for CWIP =
Completion degree x Closing WIP inventory units
Total Equivalent Units =
Completed Units + Equivalent Units in WIP
Cost per Equivalent Units (CPU) =
Cost for the period
Total equivalent units for the period
