Chapter 18 Flashcards
Process manufacturer
Produces similar products that are mass produced
in a continuous production process.
Cost accounting systems
The methods and techniques used by enterprises to track resources consumed in creating and delivering products and services to customers.
Job order costing
A cost accounting method under which the focal point of costing is a quantity of product known as a job or a lot. Costs of direct materials, direct labor, and overhead applicable to each job are compiled to arrive at average unit costs.
Process costing
A cost accounting method used in enterprises with processes characterized by continuous mass production. Costs are assigned to a manufacturing process or department before being averaged over units produced.
Distinguishing job order and process costing operations
Process costing serves two related purposes
- It measures the cost of goods manufactured on both a total and per-unit basis. This information is used in valuing inventories and in recording the cost of goods sold.
- Provides management with information about the per-unit cost of performing each step of production. This information is useful in evaluating the efficiency of production departments and often draws attention to potential cost savings.
Comparing Job order costing and process costing. How are they similar
*Records and summarizes product costs.
*Classifies product costs as direct materials, direct labor, and manufacturing overhead.
*Allocates manufacturing overhead costs to products.
*Uses a perpetual inventory system for materials, work in process, and finished goods.
*Provides useful product cost information for decision making.
Comparing Job order costing and process costing. How are they different
Job order costing: Costs are assigned to each job, the products have unique characteristics, Used by manufacturers:
* Customized products
* Special Orders
* Standard products in batches
Process costing: Accumulates costs by department for a time
period, the products are uniform or relatively
homogeneous and produced in a large volume, used by manufacturers:
* Mass production
* Large quantities
* Identical units in a continuous flow
Physical flows and cost flows for process costing
Conversion costs
The direct labor and overhead costs associated with converting direct materials into the units transferred out.
Equivalent Units of Production
Production process takes time, so companies may have products that are not completed
and are still in process at the end of accounting period.
The total production costs incurred in each process must be split between:
◦ Units that have been completed in that process and transferred to next process.
◦ Units not completed and remaining in Work-In-Process Inventory for that department.
EUP allows companies to measure the work done during the period, expressed in fully
completed units.
Used to determine the cost per unit of the completed product.
Production cost report
A detailed production report for a specified process and time period that details (1) the physical flow, (2) equivalent units, (3) cost per equivalent unit, and (4) total costs assigned.
Tracking inventory units
- Units in beginning work in process.
- Units started during the period.
- Units transferred to the next department during the period.
- Units remaining in ending work in process.
