This document provides information about process costing. It defines process costing as a method used to determine the cost of similar products that are continuously produced and flow through a production process. Costs are accumulated by production departments and assigned to products as an average cost per equivalent unit. The document includes sections on production reports, equivalent units of production, weighted average costing, and cost flows between departments, work in process, finished goods, and cost of goods sold.
Here are the costs and balances for the toy truck job on the specified dates:
4/30
Raw Materials: $5,000 (balance)
WIP: $10,000
Finished Goods: $0
5/31
Raw Materials: $0 (balance)
WIP: $15,000
Finished Goods: $10,000
6/30
Raw Materials: $0 (balance)
WIP: $0
Finished Goods: $25,000
The total cost of the job is $25,000. The costs flow from Raw Materials to WIP to Finished Goods as the job is completed over the three month period.
| Managerial Accounting | Chapter 4 | Systems Design: Process Costing | Intro...Ahmad Hassan
This document discusses process costing and provides examples of how to prepare a production report using the weighted average method. It defines key process costing concepts like equivalent units and shows how to calculate costs per equivalent unit. The production report sections include a quantity schedule with equivalent units calculation, computation of cost per equivalent unit, and a cost reconciliation section.
1. Khalid Aziz teaches financial accounting and cost accounting courses for various qualifications including ICMAP stages 1-4, ICAP modules B and D, B.Com, BBA, MBA, and PIPFA.
2. He provides crash courses and fresh classes in financial accounting and cost accounting for individuals and groups.
3. Contact information is provided for Khalid Aziz located in Karachi, Pakistan.
Costi di Processo: 4.Report della ProduzioneManager.it
The production report summarizes production activity for a period of time. It shows the flow of units and costs through the production process, and calculates equivalent units and cost per equivalent unit. The report contains three sections - a quantity schedule with equivalent units, computation of cost per equivalent unit, and a cost reconciliation showing costs accounted for through units completed and transferred out and work in process.
This document provides an overview of process cost accounting, including key concepts and steps. It defines process operations as those used for mass production of small, identical items. Equivalent units are used to calculate the total production when units are in different stages of completion. The four steps in accounting for production are: 1) determining physical flow, 2) computing equivalent units, 3) computing cost per equivalent unit, and 4) assigning and reconciling costs. A process cost summary helps managers evaluate costs and performance across periods.
- Process costing is used for products that are similar and produced continuously, while job-order costing is used for unique jobs.
- Process costing accumulates costs by department rather than individual jobs. Costs flow through manufacturing accounts like Work in Process and are ultimately transferred to Finished Goods.
- Equivalent units of production considers partially completed units by calculating a percentage of completion and combining it with fully completed units to determine total production for the period.
1. The document discusses the differences and similarities between job-order costing and process costing. Process costing accumulates costs by department and computes unit costs by department, while job-order costing accumulates costs by individual jobs and computes unit costs by job.
2. It provides steps for calculating equivalent units of production and costs per equivalent unit in process costing. Equivalent units consider partial units by multiplying the quantity by the percentage complete. Costs per equivalent unit are calculated by dividing total costs by equivalent units.
3. Costs are applied to ending work in process inventory and units transferred out based on equivalent units and costs per equivalent unit for each department. Cost reconciliation ensures total costs are properly accounted
Process costing is a costing method used when homogeneous units are produced continuously in large quantities. It assigns costs equally over the units produced in a period. There are five steps to process costing: 1) analyze physical flows, 2) calculate equivalent units, 3) determine total costs, 4) calculate unit costs, and 5) assign costs to completed and ending work-in-process units. Process costing uses journal entries to record raw material costs, conversion costs, and transfers between departments. The weighted average and first-in, first-out (FIFO) methods are two approaches to assign costs in process costing.
Here are the costs and balances for the toy truck job on the specified dates:
4/30
Raw Materials: $5,000 (balance)
WIP: $10,000
Finished Goods: $0
5/31
Raw Materials: $0 (balance)
WIP: $15,000
Finished Goods: $10,000
6/30
Raw Materials: $0 (balance)
WIP: $0
Finished Goods: $25,000
The total cost of the job is $25,000. The costs flow from Raw Materials to WIP to Finished Goods as the job is completed over the three month period.
| Managerial Accounting | Chapter 4 | Systems Design: Process Costing | Intro...Ahmad Hassan
This document discusses process costing and provides examples of how to prepare a production report using the weighted average method. It defines key process costing concepts like equivalent units and shows how to calculate costs per equivalent unit. The production report sections include a quantity schedule with equivalent units calculation, computation of cost per equivalent unit, and a cost reconciliation section.
1. Khalid Aziz teaches financial accounting and cost accounting courses for various qualifications including ICMAP stages 1-4, ICAP modules B and D, B.Com, BBA, MBA, and PIPFA.
2. He provides crash courses and fresh classes in financial accounting and cost accounting for individuals and groups.
3. Contact information is provided for Khalid Aziz located in Karachi, Pakistan.
Costi di Processo: 4.Report della ProduzioneManager.it
The production report summarizes production activity for a period of time. It shows the flow of units and costs through the production process, and calculates equivalent units and cost per equivalent unit. The report contains three sections - a quantity schedule with equivalent units, computation of cost per equivalent unit, and a cost reconciliation showing costs accounted for through units completed and transferred out and work in process.
This document provides an overview of process cost accounting, including key concepts and steps. It defines process operations as those used for mass production of small, identical items. Equivalent units are used to calculate the total production when units are in different stages of completion. The four steps in accounting for production are: 1) determining physical flow, 2) computing equivalent units, 3) computing cost per equivalent unit, and 4) assigning and reconciling costs. A process cost summary helps managers evaluate costs and performance across periods.
- Process costing is used for products that are similar and produced continuously, while job-order costing is used for unique jobs.
- Process costing accumulates costs by department rather than individual jobs. Costs flow through manufacturing accounts like Work in Process and are ultimately transferred to Finished Goods.
- Equivalent units of production considers partially completed units by calculating a percentage of completion and combining it with fully completed units to determine total production for the period.
1. The document discusses the differences and similarities between job-order costing and process costing. Process costing accumulates costs by department and computes unit costs by department, while job-order costing accumulates costs by individual jobs and computes unit costs by job.
2. It provides steps for calculating equivalent units of production and costs per equivalent unit in process costing. Equivalent units consider partial units by multiplying the quantity by the percentage complete. Costs per equivalent unit are calculated by dividing total costs by equivalent units.
3. Costs are applied to ending work in process inventory and units transferred out based on equivalent units and costs per equivalent unit for each department. Cost reconciliation ensures total costs are properly accounted
Process costing is a costing method used when homogeneous units are produced continuously in large quantities. It assigns costs equally over the units produced in a period. There are five steps to process costing: 1) analyze physical flows, 2) calculate equivalent units, 3) determine total costs, 4) calculate unit costs, and 5) assign costs to completed and ending work-in-process units. Process costing uses journal entries to record raw material costs, conversion costs, and transfers between departments. The weighted average and first-in, first-out (FIFO) methods are two approaches to assign costs in process costing.
Process costing is used to assign costs to units produced in continuous production and calculates equivalent units of production to account for incomplete units, while job order costing tracks costs for individual jobs or orders; process costing uses weighted average or FIFO methods to calculate equivalent units, with the difference being whether beginning inventory is combined or separated from current production; a company may use a hybrid costing system to apply aspects of both job order and process costing to different product lines or processes within the company.
Process costing is a method of accounting used in manufacturing to determine the cost per unit of production for mass-produced goods. It tracks costs through each production stage and assigns costs to units produced based on materials, labor, and overhead in each stage. Costs are accumulated by department, a unit cost is determined for each department, and then costs are transferred between departments and to finished goods inventory. Accurate costing requires that costs are identified with units produced in the same period.
An expert summarizes a multi-question document on process costing as follows:
1. The document contains ten multiple choice questions regarding process costing systems, including weighted average process costing. It provides data on units, costs, and percentage of completion for various process departments.
2. It asks the reader to calculate equivalent units, costs per equivalent unit, total costs of units transferred out, and costs of ending work in process inventory based on the data given.
3. The last question asks the reader to identify that units completed in an Assembly department would become units started in a subsequent Finishing department under a weighted-average process costing system.
This document discusses job costing, which is a costing system where the cost object is a distinct unit or job. It may use different amounts of resources than other jobs. The document outlines the key concepts of job costing, including actual and normal costing approaches, tracking costs through journal entries, and adjusting for over- or under-applied manufacturing overhead at year-end using different methods. It provides examples to illustrate job costing calculations and journal entries.
This document discusses job order costing and process costing systems. Job order costing accumulates costs for each unique job or batch of products, and is used by companies that produce specialized or custom products. Process costing accumulates costs for each production step and is used by companies that mass produce similar products. The document provides examples of companies that would use each type of system and outlines the key differences between how costs are traced and allocated under job order versus process costing.
This document provides an overview of managerial accounting. It discusses the differences between managerial and financial accounting, managerial cost concepts including direct materials, direct labor, and manufacturing overhead, and job order cost accounting. Job order cost accounting involves accumulating manufacturing costs, assigning costs to work in process and finished goods, and recognizing cost of goods sold. Costs flow through the job cost sheet which tracks costs by job.
ACG 2071 Managerial Accounting Process Costing Systems .docxbobbywlane695641
ACG 2071 Managerial Accounting
Process Costing Systems
Minicase
PROCESS COSTING PROBLEM
Spectre Chemicals produces Zaloff in a two department process. Information on the two
departments for March and April, 2011 are as follows:
March 2011:
Department 1: The company had beginning inventory of 6,000 units, 40% completed with a
cost of $45,000. During the month, the department transferred in 22,000 units of the direct
materials with a cost of $10 per unit. Ending inventory was 7,000 units, 30% completed.
Direct labor is $310,500 and factory overhead is $103,500.
Department 2: The company had beginning inventory of 5,000 units, 70% completed with a
cost of $80,000. During the month, direct labor was $175,000 and factory overhead was
$87,500. Ending inventory was 10,000 units, 50% completed.
April 2011:
Department 1: During the month, the department transferred in 20,000 units of the direct
materials with a cost of $11 per unit. Direct labor is $209,000 and factory overhead is
$104,500. Ending inventory is 10,000 units 60% completed.
Department 2: The company had beginning inventory of 5,000 units, 70% completed with a
cost of $80,000. During the month, direct labor is $175,000 and factory overhead is
$87,500.
Required:
Compute the Equivalent Units of Production, Material costs, and Conversion costs for each
department for March and April, 2011.
Complete the attached chart – one for each department and each month
Prepare a cost of production report for March and April 2011.
ACG 2071
Process Cost Systems
Created by: M. Mari
Fall 2009-1
Page 1 of 13
Process Manufacturing
Is the mass production of products in a continuous flow
of steps
Products pass through a series of sequential processes
Each process is identified a separate production,
department, workstation, or work center.
With the exception of the first process or department,
each receives the output from the prior department as
a partially processed product.
Depending on the nature of the process, a company
applies direct labor, overhead, and additional direct
materials to move the product toward completion.
Process Cost System
Assigns direct materials, direct labor, and overhead
to specific processes.
Costs are allocated by department rather than jobs
Manufacturing costs are allocated to products based
on units of production
Manufacturing costs are accumulated and transferred
by department
The total costs associated with each process are then
divided by the number of units passing through that
process to determine the cost per equivalent units
for that process
ACG 2071
Process Cost Systems
Created by: M. Mari
Fall 2009-1
Page 2 of 13
To understand how costs are allocated, first we must decide
how the costs are accumulated. One method is First in, First
out method.
Beverage Production
Costs flow fr.
cost accounting chapter 6, fundamentals of product and service designBeaDelaPenia1
This document discusses job-order costing systems used by manufacturing firms that produce unique products in small batches. It explains the key aspects of setting up a job-order costing system including cost accumulation, measurement, and assignment. Costs like direct materials, direct labor, and applied overhead are traced to individual jobs and accumulated on job cost sheets. The chapter compares using a single overhead rate versus multiple rates and how they impact cost assignment.
This document discusses accounting for factory overhead costs. It covers identifying variable and fixed overhead costs, budgeting overhead, accumulating actual overhead costs, applying overhead to production using predetermined overhead rates, and accounting for differences between actual and applied overhead. Methods discussed include direct labor cost rate, direct labor hour rate, and activity-based costing. The document also addresses distributing service department costs and treating under- or over-applied overhead.
The document discusses various cost concepts and classifications including:
- Fixed vs direct vs variable costs and functional vs behavioral costs
- Cost classifications such as functional (materials, labor, overhead) and behavioral (fixed, variable) costs
- Cost relationships in a manufacturing company's income statement and how costs flow through work-in-process and finished goods inventory
- Different cost behavior patterns such as total fixed costs, committed fixed costs, total variable costs, total mixed costs, and total step costs
- Methods for separating mixed costs into fixed and variable components
- The impact of computers on manufacturing through technologies like automatic identification systems, computer-aided design, computer-aided manufacturing, flexible manufacturing systems, and computer-integr
CA Ch.18-Process Costing-part 1-Nureni.pdfsandiibrahim3
The document provides information about process costing, including:
1) Process costing is a system used to calculate unit costs by dividing total costs by units of output, with each unit receiving similar amounts of direct materials, labor, and overhead costs.
2) There are five steps to process costing: summarizing physical units, computing equivalent units, summarizing costs, computing cost per equivalent unit, and assigning costs.
3) The document includes examples demonstrating the weighted average and FIFO methods of process costing, as well as explaining how transferred-in costs from previous departments are treated.
Hilton Products manufactures one product in two departments on a con.docxfideladallimore
Hilton Products manufactures one product in two departments on a continuous basis and uses the average method of process cost accounting.
The following information was reported for the month of May.
Hilton Products manufactures one product in two departments on a continuous basis and uses the average method of process cost accounting.
The following information was reported for the month of May.
Production Costs
Machining
Assembly
Work in process, beginning of month:
$
-
$
27,000
Cost in Machining
Materials
$
4,000
$
800
Labor
3,000
400
Factory overhead
2,000
$
9,000
600
$
1,800
Cost incurred during month:
Materials
$
68,000
$
44,000
Labor
51,000
22,000
Factory overhead
34,000
153,000
33,000
99,000
Total
$
162,000
$
127,800
Production Costs
Machining
Assembly
(Units)
(Units)
In process, beginning of month
1,000
1,000
Finished and transferred during month
5,000
4,000
In process, end of month
2,000
2,000
Stage of completion as to materials, labor, overhead
One-half
One-half
Requirements:
Prepare a cost of production summary for each department for the month.
Berg Products
Cost of Production Summary—Machining
For the Month Ended May 31, 2011
Cost of work in process, beginning of month:
Materials
Labor
Factory overhead
Cost of production for month:
Materials
Labor
Factory overhead
Total costs to be accounted for
Unit output for month:
Finished and transferred to Assembly during month
Equivalent units of WIP, end of month
Total equivalent production
Unit cost for month:
Materials
Labor
Factory overhead
Total
Inventory costs:
Cost of goods finished & transferred to Assembly during month
Cost of work in process, end of month:
Materials
Labor
Factory overhead
Total production costs accounted for
Berg Products
Cost of Production Summary—Assembly
For the Month Ended May 31, 2008
Cost of work in process, beginning of month:
Cost in Machining
Cost in Assembly:
Materials
Labor
Factory overhead
Cost of goods received from Machining during month
Cost of production for month:
Materials
Labor
Factory overhead
Total cost to be accounted for
Unit output for month:
Finished and transferred to stockroom during month
Equivalent units of work in process, end of month
Total equivalent production
Unit cost for month:
Cost from prior department:
Beginning inventory
Transferred in this month
Average cost per unit
Cost in Assembly:
Materials
Labor
Factory overhead
Total
Inventory costs:
.
This document discusses process costing, which is a method of cost accounting used in manufacturing industries. It involves breaking production down into sequential processes and computing an average cost per unit by dividing total production costs for a period by the units produced. Key aspects covered include accounting treatment of material, labor, and overhead costs for each process, treatment of normal and abnormal losses and gains, and methods for valuing work-in-progress inventory using either FIFO or weighted average costing. An example is provided to illustrate the calculation of process costs using both methods. Advantages of process costing include ease of preparing quotes while limitations include inability to evaluate performance or reliability for costing multiple product types.
The document discusses process costing and provides examples of how it is applied. It begins with an overview of process costing and how it differs from job order costing. It then provides examples of the physical and cost flows for a process manufacturer, showing how direct and indirect materials, direct labor, and factory overhead flow through the production process. The document includes a detailed example of calculating the costs for the Melting Department of a steel manufacturer, including determining equivalent units, calculating unit costs, and allocating costs to completed and partially completed units. It concludes with an example cost of production report for the Melting Department.
This document provides information about job order costing and process costing systems. It defines job order costing as a system that separately accumulates costs for each unique job, while process costing collects costs by department for mass produced homogeneous items. The key differences are that job order costing tracks heterogeneous jobs individually, while process costing tracks homogeneous production on a departmental basis. The document also includes examples of journal entries, a job order cost sheet, and a process costing production report with calculations.
Cost and Management Accounting I Chapter 3 (2)(2)-1 (1).pptxObsaKamil
This document discusses cost allocation, which is the process of assigning indirect costs to cost objects like products or services using an allocation base. It provides definitions for key terms like cost object, cost pool, and cost driver. It also outlines the steps in the cost allocation process, including planning, application, recording, and reconciliation. Finally, it compares traditional cost allocation using a single overhead rate to activity-based costing, which uses multiple cost pools and drivers.
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Process costing is used to assign costs to units produced in continuous production and calculates equivalent units of production to account for incomplete units, while job order costing tracks costs for individual jobs or orders; process costing uses weighted average or FIFO methods to calculate equivalent units, with the difference being whether beginning inventory is combined or separated from current production; a company may use a hybrid costing system to apply aspects of both job order and process costing to different product lines or processes within the company.
Process costing is a method of accounting used in manufacturing to determine the cost per unit of production for mass-produced goods. It tracks costs through each production stage and assigns costs to units produced based on materials, labor, and overhead in each stage. Costs are accumulated by department, a unit cost is determined for each department, and then costs are transferred between departments and to finished goods inventory. Accurate costing requires that costs are identified with units produced in the same period.
An expert summarizes a multi-question document on process costing as follows:
1. The document contains ten multiple choice questions regarding process costing systems, including weighted average process costing. It provides data on units, costs, and percentage of completion for various process departments.
2. It asks the reader to calculate equivalent units, costs per equivalent unit, total costs of units transferred out, and costs of ending work in process inventory based on the data given.
3. The last question asks the reader to identify that units completed in an Assembly department would become units started in a subsequent Finishing department under a weighted-average process costing system.
This document discusses job costing, which is a costing system where the cost object is a distinct unit or job. It may use different amounts of resources than other jobs. The document outlines the key concepts of job costing, including actual and normal costing approaches, tracking costs through journal entries, and adjusting for over- or under-applied manufacturing overhead at year-end using different methods. It provides examples to illustrate job costing calculations and journal entries.
This document discusses job order costing and process costing systems. Job order costing accumulates costs for each unique job or batch of products, and is used by companies that produce specialized or custom products. Process costing accumulates costs for each production step and is used by companies that mass produce similar products. The document provides examples of companies that would use each type of system and outlines the key differences between how costs are traced and allocated under job order versus process costing.
This document provides an overview of managerial accounting. It discusses the differences between managerial and financial accounting, managerial cost concepts including direct materials, direct labor, and manufacturing overhead, and job order cost accounting. Job order cost accounting involves accumulating manufacturing costs, assigning costs to work in process and finished goods, and recognizing cost of goods sold. Costs flow through the job cost sheet which tracks costs by job.
ACG 2071 Managerial Accounting Process Costing Systems .docxbobbywlane695641
ACG 2071 Managerial Accounting
Process Costing Systems
Minicase
PROCESS COSTING PROBLEM
Spectre Chemicals produces Zaloff in a two department process. Information on the two
departments for March and April, 2011 are as follows:
March 2011:
Department 1: The company had beginning inventory of 6,000 units, 40% completed with a
cost of $45,000. During the month, the department transferred in 22,000 units of the direct
materials with a cost of $10 per unit. Ending inventory was 7,000 units, 30% completed.
Direct labor is $310,500 and factory overhead is $103,500.
Department 2: The company had beginning inventory of 5,000 units, 70% completed with a
cost of $80,000. During the month, direct labor was $175,000 and factory overhead was
$87,500. Ending inventory was 10,000 units, 50% completed.
April 2011:
Department 1: During the month, the department transferred in 20,000 units of the direct
materials with a cost of $11 per unit. Direct labor is $209,000 and factory overhead is
$104,500. Ending inventory is 10,000 units 60% completed.
Department 2: The company had beginning inventory of 5,000 units, 70% completed with a
cost of $80,000. During the month, direct labor is $175,000 and factory overhead is
$87,500.
Required:
Compute the Equivalent Units of Production, Material costs, and Conversion costs for each
department for March and April, 2011.
Complete the attached chart – one for each department and each month
Prepare a cost of production report for March and April 2011.
ACG 2071
Process Cost Systems
Created by: M. Mari
Fall 2009-1
Page 1 of 13
Process Manufacturing
Is the mass production of products in a continuous flow
of steps
Products pass through a series of sequential processes
Each process is identified a separate production,
department, workstation, or work center.
With the exception of the first process or department,
each receives the output from the prior department as
a partially processed product.
Depending on the nature of the process, a company
applies direct labor, overhead, and additional direct
materials to move the product toward completion.
Process Cost System
Assigns direct materials, direct labor, and overhead
to specific processes.
Costs are allocated by department rather than jobs
Manufacturing costs are allocated to products based
on units of production
Manufacturing costs are accumulated and transferred
by department
The total costs associated with each process are then
divided by the number of units passing through that
process to determine the cost per equivalent units
for that process
ACG 2071
Process Cost Systems
Created by: M. Mari
Fall 2009-1
Page 2 of 13
To understand how costs are allocated, first we must decide
how the costs are accumulated. One method is First in, First
out method.
Beverage Production
Costs flow fr.
cost accounting chapter 6, fundamentals of product and service designBeaDelaPenia1
This document discusses job-order costing systems used by manufacturing firms that produce unique products in small batches. It explains the key aspects of setting up a job-order costing system including cost accumulation, measurement, and assignment. Costs like direct materials, direct labor, and applied overhead are traced to individual jobs and accumulated on job cost sheets. The chapter compares using a single overhead rate versus multiple rates and how they impact cost assignment.
This document discusses accounting for factory overhead costs. It covers identifying variable and fixed overhead costs, budgeting overhead, accumulating actual overhead costs, applying overhead to production using predetermined overhead rates, and accounting for differences between actual and applied overhead. Methods discussed include direct labor cost rate, direct labor hour rate, and activity-based costing. The document also addresses distributing service department costs and treating under- or over-applied overhead.
The document discusses various cost concepts and classifications including:
- Fixed vs direct vs variable costs and functional vs behavioral costs
- Cost classifications such as functional (materials, labor, overhead) and behavioral (fixed, variable) costs
- Cost relationships in a manufacturing company's income statement and how costs flow through work-in-process and finished goods inventory
- Different cost behavior patterns such as total fixed costs, committed fixed costs, total variable costs, total mixed costs, and total step costs
- Methods for separating mixed costs into fixed and variable components
- The impact of computers on manufacturing through technologies like automatic identification systems, computer-aided design, computer-aided manufacturing, flexible manufacturing systems, and computer-integr
CA Ch.18-Process Costing-part 1-Nureni.pdfsandiibrahim3
The document provides information about process costing, including:
1) Process costing is a system used to calculate unit costs by dividing total costs by units of output, with each unit receiving similar amounts of direct materials, labor, and overhead costs.
2) There are five steps to process costing: summarizing physical units, computing equivalent units, summarizing costs, computing cost per equivalent unit, and assigning costs.
3) The document includes examples demonstrating the weighted average and FIFO methods of process costing, as well as explaining how transferred-in costs from previous departments are treated.
Hilton Products manufactures one product in two departments on a con.docxfideladallimore
Hilton Products manufactures one product in two departments on a continuous basis and uses the average method of process cost accounting.
The following information was reported for the month of May.
Hilton Products manufactures one product in two departments on a continuous basis and uses the average method of process cost accounting.
The following information was reported for the month of May.
Production Costs
Machining
Assembly
Work in process, beginning of month:
$
-
$
27,000
Cost in Machining
Materials
$
4,000
$
800
Labor
3,000
400
Factory overhead
2,000
$
9,000
600
$
1,800
Cost incurred during month:
Materials
$
68,000
$
44,000
Labor
51,000
22,000
Factory overhead
34,000
153,000
33,000
99,000
Total
$
162,000
$
127,800
Production Costs
Machining
Assembly
(Units)
(Units)
In process, beginning of month
1,000
1,000
Finished and transferred during month
5,000
4,000
In process, end of month
2,000
2,000
Stage of completion as to materials, labor, overhead
One-half
One-half
Requirements:
Prepare a cost of production summary for each department for the month.
Berg Products
Cost of Production Summary—Machining
For the Month Ended May 31, 2011
Cost of work in process, beginning of month:
Materials
Labor
Factory overhead
Cost of production for month:
Materials
Labor
Factory overhead
Total costs to be accounted for
Unit output for month:
Finished and transferred to Assembly during month
Equivalent units of WIP, end of month
Total equivalent production
Unit cost for month:
Materials
Labor
Factory overhead
Total
Inventory costs:
Cost of goods finished & transferred to Assembly during month
Cost of work in process, end of month:
Materials
Labor
Factory overhead
Total production costs accounted for
Berg Products
Cost of Production Summary—Assembly
For the Month Ended May 31, 2008
Cost of work in process, beginning of month:
Cost in Machining
Cost in Assembly:
Materials
Labor
Factory overhead
Cost of goods received from Machining during month
Cost of production for month:
Materials
Labor
Factory overhead
Total cost to be accounted for
Unit output for month:
Finished and transferred to stockroom during month
Equivalent units of work in process, end of month
Total equivalent production
Unit cost for month:
Cost from prior department:
Beginning inventory
Transferred in this month
Average cost per unit
Cost in Assembly:
Materials
Labor
Factory overhead
Total
Inventory costs:
.
This document discusses process costing, which is a method of cost accounting used in manufacturing industries. It involves breaking production down into sequential processes and computing an average cost per unit by dividing total production costs for a period by the units produced. Key aspects covered include accounting treatment of material, labor, and overhead costs for each process, treatment of normal and abnormal losses and gains, and methods for valuing work-in-progress inventory using either FIFO or weighted average costing. An example is provided to illustrate the calculation of process costs using both methods. Advantages of process costing include ease of preparing quotes while limitations include inability to evaluate performance or reliability for costing multiple product types.
The document discusses process costing and provides examples of how it is applied. It begins with an overview of process costing and how it differs from job order costing. It then provides examples of the physical and cost flows for a process manufacturer, showing how direct and indirect materials, direct labor, and factory overhead flow through the production process. The document includes a detailed example of calculating the costs for the Melting Department of a steel manufacturer, including determining equivalent units, calculating unit costs, and allocating costs to completed and partially completed units. It concludes with an example cost of production report for the Melting Department.
This document provides information about job order costing and process costing systems. It defines job order costing as a system that separately accumulates costs for each unique job, while process costing collects costs by department for mass produced homogeneous items. The key differences are that job order costing tracks heterogeneous jobs individually, while process costing tracks homogeneous production on a departmental basis. The document also includes examples of journal entries, a job order cost sheet, and a process costing production report with calculations.
Cost and Management Accounting I Chapter 3 (2)(2)-1 (1).pptxObsaKamil
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2. Job-order
Costing
Process
Costing
Many units of a single, homogeneous product
flow evenly through a continuous production
process.
One unit of product is indistinguishable from any
other unit of product.
Each unit of product is assigned the same
average cost.
Types of Costing Systems Used
to Determine Product Costs
3. Types of Costing Systems Used
to Determine Product Costs
Job-order
Costing
Process
Costing
Typical process cost applications:
Petrochemical refinery
Paint manufacturer
Paper mill
4. Job order costing
Many jobs are worked
during the period.
Costs are accumulated
by individual jobs.
Job cost sheet is the
key document.
Unit cost computed by
job.
Process costing
A single product is
produced for a long
period of time.
Costs are accumulated
by departments.
Department production
report is key document.
Unit costs are computed
by department.
Differences Between Job-
Order and Process Costing
5. Process costing is used for products that are:
a. Different and produced continuously.
b. Similar and produced continuously.
c. Individual units produced to customer
specifications.
d. Purchased from vendors.
Quick Check
6. Process costing is used for products that are:
a. Different and produced continuously.
b. Similar and produced continuously.
c. Individual units produced to customer
specifications.
d. Purchased from vendors.
Quick Check
7. Process Costing
Direct labor costs
may be small
in comparison to
other product
costs in process
cost systems.
Direct
Materials
Type of Product Cost
Dollar
Amount
Direct
Labor
Overhead
8. Process Costing
Type of Product Cost
Dollar
Amount
Conversion
So, direct labor and manufacturing overhead are often
combined into one product cost called conversion.
Direct labor costs
may be small
in comparison to
other product
costs in process
cost systems.
Direct
Materials
9. Comparing Job-Order
and Process Costing
Finished
Goods
Cost of
Goods
Sold
Work in
Process
Direct
Materials
Direct Labor
Manufacturing
Overhead
10. Comparing Job-Order
and Process Costing
Finished
Goods
Cost of
Goods
Sold
Direct Labor
Manufacturing
Overhead
Jobs
Costs are traced and
applied to individual
jobs in a job-order
cost system.
Direct
Materials
11. Comparing Job-Order
and Process Costing
Finished
Goods
Cost of
Goods
Sold
Direct Labor
Manufacturing
Overhead
Processing
Department
Costs are traced and
applied to departments
in a process cost
system.
Direct
Materials
12. Process Cost Flows
Let’s look at cost flows in a
process cost system with
Departments A and B.
We will use
T-accounts and
start with materials.
13. Raw Materials
•Purchases •Direct
Materials
Process Cost Flows
•Indirect
Materials
•Direct
Materials
Work in Process
Department B
Work in Process
Department A
•Other
Overhead
Manufacturing
Overhead
Actual Applied
•Indirect
Materials
•Direct
Materials
•Direct
Labor
14. Process Cost Flows
Work in Process
Department B
•Direct
Labor
Work in Process
Department A
•Other
Overhead
Manufacturing
Overhead
Actual Applied
•Indirect
Materials
•Indirect
Labor
Wages Payable
•Direct
Labor
•Indirect
Labor
•Direct
Materials
•Direct
Labor
•Direct
Materials
15. Process Cost Flows
Work in Process
Department B
Work in Process
Department A
•Overhead
Applied to
Work in
Process
•Applied
Overhead
•Applied
Overhead
•Other
Overhead
Manufacturing
Overhead
Actual Applied
•Indirect
Materials
•Indirect
Labor
•Direct
Labor
•Direct
Materials
•Direct
Labor
•Direct
Materials
17. Process Cost Flows
Work in Process
Department B
Work in Process
Department A
•Direct
Materials
•Direct
Labor
•Applied
Overhead
•Direct
Materials
•Direct
Labor
•Applied
Overhead
Transferred
to Dept. B
•Transferred
from Dept. A
19. Finished Goods
Cost of Goods Sold
Process Cost Flows
Work in Process
Department B
•Cost of
Goods
Manufactured
•Direct
Materials
•Direct
Labor
•Applied
Overhead
•Transferred
from Dept. A
•Cost of
Goods
Sold
•Cost of
Goods
Sold
•Cost of
Goods
Manufactured
20. Equivalent Units of Production
Equivalent units are partially complete
and are part of work in process
inventory. Partially completed
products are expressed in terms of a
smaller number of fully completed
units.
21. Equivalent Units of Production
Two half completed products are
equivalent to one completed product.
So, 10,000 units 70 percent complete
are equivalent to 7,000 complete units.
+ = 1
22. For the current period, Jones started 15,000
units and completed 10,000 units, leaving
5,000 units in process 30 percent complete.
How many equivalent units of production did
Jones have for the period?
a. 10,000
b. 11,500
c. 13,500
d. 15,000
Quick Check
23. For the current period, Jones started 15,000
units and completed 10,000 units, leaving
5,000 units in process 30 percent complete.
How many equivalent units of production did
Jones have for the period?
a. 10,000
b. 11,500
c. 13,500
d. 15,000
10,000 units + (5,000 units × 0.30)
= 11,500 equivalent units
Quick Check
24. Calculating and Using
Equivalent Units of Production
To calculate the cost per
equivalent unit for the period:
Cost per
equivalent
unit
=
Costs for the period
Equivalent units of production
for the period
25. Now assume that Jones incurred
$27,600 in production costs for the
11,500 equivalent units of production.
What was Jones’ cost per equivalent unit
for the period?
a. $1.84
b. $2.40
c. $2.76
d. $2.90
Quick Check
26. Now assume that Jones incurred
$27,600 in production costs for the
11,500 equivalent units of production.
What was Jones’ cost per equivalent unit
for the period?
a. $1.84
b. $2.40
c. $2.76
d. $2.90
$27,600 ÷ 11,500 equivalent units
= $2.40 per equivalent unit
Quick Check
27. Equivalent Units of Production –
Weighted Average Method
The weighted average method . . .
Makes no distinction between work done in prior
and current period.
Blends together units and costs from prior
period and current period.
Let’s see how this works!
28. Weighted Average Example
Smith Company reported the following activity
in Department A for the month of June:
Percent Completed
Units Materials Conversion
Work in process, June 1 300 40% 20%
Units started into production in June 6,000
Units completed and transferred out 5,400
of Department A during June
Work in process, June 30 900 60% 30%
29. Equivalent units are calculated as follows:
Weighted Average Example
Materials Conversion
Units completed and transferred
out of Department A in June 5,400 5,400
30. Equivalent units are calculated as follows:
Weighted Average Example
Materials Conversion
Units completed and transferred
out of Department A in June 5,400 5,400
Work in process, June 30:
900 units × 60% 540
Equivalent units of Production in
Department A during June 5,940
31. Equivalent units are calculated as follows:
Weighted Average Example
Materials Conversion
Units completed and transferred
out of Department A in June 5,400 5,400
Work in process, June 30:
900 units × 60% 540
900 units × 30% 270
Equivalent units of Production in
Department A during June 5,940 5,670
32. Materials Conversion
Units completed and transferred
out of Department A in June 5,400 5,400
Work in process, June 30:
900 units × 60% 540
900 units × 30% 270
Equivalent units of Production in
Department A during June 5,940 5,670
Equivalent units of production always equals:
Units completed and transferred
+ Equivalent units remaining in work in process
Weighted Average Example
33. Beginning
Work in Process
300 Units
40% Complete
Ending
Work in Process
900 Units
60% Complete
6,000 Units Started
5,400 Units Completed
5,100 Units Started
and Completed
Weighted Average Example
Materials
5,400 Units Completed
540 Equivalent Units 900 × 60%
5,940 Equivalent units
of production
34. 6,000 Units Started
5,400 Units Completed
5,100 Units Started
and Completed
270 Equivalent Units 900 × 30%
5,670 Equivalent units
of production
Beginning
Work in Process
300 Units
20% Complete
Ending
Work in Process
900 Units
30% Complete
Weighted Average Example
Conversion
36. Production Report
A computation of
cost per equivalent unit.
Section 1
Section 2
Section 3
Production Report
A quantity schedule
showing the flow of units
and the computation of
equivalent units.
37. Production Report
A reconciliation of cost
flows for the period,
including:
Total cost for units
completed and
transferred from the
processing department.
Total cost for partially
completed units
remaining in work in
process.
Section 1
Section 2
Section 3
Production Report
38. Double Diamond Skis uses process costing to
determine unit costs in its Shaping and Milling
Department.
Double Diamond uses the weighted average
cost procedure.
Using the following information for the month of
May, let’s prepare a production report for
Shaping and Milling.
Production Report Example
39. Work in process, May 1: 200 units
Materials: 55% complete. $ 9,600
Conversion: 30% complete. 5,575
Production started during May: 5,000 units
Production completed during May: 4,800 units
Costs added to production in May
Materials cost $ 368,600
Conversion cost 350,900
Work in process, May 31: 400 units
Materials 40% complete.
Conversion 25% complete.
Production Report Example
40. Section 1: Quantity Schedule with Equivalent Units
Production Report Example
Units to be accounted for:
Work in process, May 1 200
Started into production 5,000
Total units 5,200
Equivalent units
Materials Conversion
Units accounted for as follows:
Completed and transferred 4,800 4,800 4,800
Work in process, May 31 400
41. Production Report Example
Units to be accounted for:
Work in process, May 1 200
Started into production 5,000
Total units 5,200
Equivalent units
Materials Conversion
Units accounted for as follows:
Completed and transferred 4,800 4,800 4,800
Work in process, May 31 400
Materials 40% complete 160
5,200 4,960
Section 1: Quantity Schedule with Equivalent Units
42. Production Report Example
Units to be accounted for:
Work in process, May 1 200
Started into production 5,000
Total units 5,200
Equivalent units
Materials Conversion
Units accounted for as follows:
Completed and transferred 4,800 4,800 4,800
Work in process, May 31 400
Materials 40% complete 160
Conversion 25% complete 100
5,200 4,960 4,900
Section 1: Quantity Schedule with Equivalent Units
43. Section 2: Compute cost per equivalent unit
Production Report Example
Total
Cost Materials Conversion
Cost to be accounted for:
Work in process, May 1 15,175
$ 9,600
$ 5,575
$
Costs added in the Shipping
and Milling Department 719,500 368,600 350,900
Total cost 734,675
$ 378,200
$ 356,475
$
Equivalent units 4,960 4,900
Cost per equivalent unit
44. Total
Cost Materials Conversion
Cost to be accounted for:
Work in process, May 1 15,175
$ 9,600
$ 5,575
$
Costs added in the Shipping
and Milling Department 719,500 368,600 350,900
Total cost 734,675
$ 378,200
$ 356,475
$
Equivalent units 4,960 4,900
Cost per equivalent unit 76.25
$
Production Report Example
Section 2: Compute cost per equivalent unit
$378,200 ÷ 4,960 units = $76.25
45. Total
Cost Materials Conversion
Cost to be accounted for:
Work in process, May 1 15,175
$ 9,600
$ 5,575
$
Costs added in the Shipping
and Milling Department 719,500 368,600 350,900
Total cost 734,675
$ 378,200
$ 356,475
$
Equivalent units 4,960 4,900
Cost per equivalent unit 76.25
$ 72.75
$
Total cost per equivalent unit = $76.25 + $72.75 = $149.00
Production Report Example
$356,475 ÷ 4,900 units = $72.75
Section 2: Compute cost per equivalent unit
46. Section 3: Cost Reconciliation
Production Report Example
Total Equivalent Units
Cost Materials Conversion
Cost accounted for as follows:
Transferred out during May 4,800 4,800
Work in process, May 31:
Materials 160
Conversion 100
Total work in process, May 31
Total cost accounted for
47. Total Equivalent Units
Cost Materials Conversion
Cost accounted for as follows:
Transferred out during May 715,200
$ 4,800 4,800
Work in process, May 31:
Materials 160
Conversion 100
Total work in process, May 31
Total cost accounted for
4,800 units @ $149.00
Production Report Example
Section 3: Cost Reconciliation
48. Total Equivalent Units
Cost Materials Conversion
Cost accounted for as follows:
Transferred out during May 715,200
$ 4,800 4,800
Work in process, May 31:
Materials 12,200 160
Conversion 7,275 100
Total work in process, May 31 19,475
Total cost accounted for 734,675
$
160 units @ $76.25
Production Report Example
Section 3: Cost Reconciliation
All costs
accounted for
100 units @ $72.75