dwProcess Costing Flashcards
process cost systems
apply costs to similar products that are mass produced continuously
so should service companies use process costing or job order costing?
Depends on if the work is routing or non routine
JOB ORDER COST FLOW
DM, DL, MOH > WIP > FG int > COGS
Process Cost flow
DM,DL,MOH > WIP > WIP 2 > FG > COGS
How are process cost flow and job order cost flow ismilar?
- same manufacturing cost elements (dm, dl, moh)
- accumulating cost of materials, labor, overhead (debit rm to rm inventory, fl to FL, moh costs to MOH)
- flow of costs: same accounts (wip, fg, cogs)
Differences between job order cost and process cost system
- # of WIP: multiple WIP used in PC
- Docs: production cost report created for each department
- point at which costs totaled: process cost system totals cost at end of time
- unit cost comp: total manufacturing costs/units produced
docs to track cost in job order system
charges costs to individuals jobs and summarizes them in a job cost sheet
when are job order cost totaled
by system when the jo bis complete
what are the unit cost
total cost per job divided by units produced
how to make JE’s for work in process accts?
Work in Process - 1
Work in Process - 2
RM Inventory
Work in Process - 1
Work in Process - 2
Factory Labor
Work in Process - 1
Work in Process - 2
MOH
Transfering from first WIP to second
WIP - 2
WIP - 1
Transfered to finished goods
FG inventory
WIP - 2
equivalent units of production
measure the work done in a period
expressed in fully compelted units
formula for equivalent units of production. initial
units completed and transfered out + equivalent units of ending WIP
**the beginning work in process is not part of the equivalent-units-of-production formula
equivalent units of production- materials
units completed and transsfered out- materials
+
equivalent units of ending work in process- materials
equivalent units of production - conversion costs
units completed and transfered out- conversion costs
+
equivalent units of ending work in process - converison costs
production cost report steps
- compute physical unit flow
- compute equivalent units of production
- compute unit production costs
- prepare cost reconoculiation schedule
Computing unit flow!
Work in Process begin
DM
conversion costs
Units started into prod during June
Units ocmpleted and trnsferred to WIP2
WIP end
DM
conversion costs
Cost section
WIP, begin
DM ##
cOnversion costs ##
Cost of WIP begin
COsts incurred during year
DM ##
COnversion costs ##
Costs incurred in june
computing physcial unit flow stesp
UNITS STARTED/TRANSFERRED TO PRODUCTION + UNITS IN PROCESS AT BEGINNING OF PERIOD = TOTAL UNITS TO BE ACCOUNTED FOR
then you account by the output for the period; units transferred out during the period + any units in process at the end of the period = total units accoutned for
how to compute equivalent units of prodcuton
107
how to compute unit production costs
107
107 & 108
Costing Systems—Final Comments
Companies often use a combination of a process cost and a job order cost system.
Called operations costing, this hybrid system is similar to process costing in its
assumption that standardized methods are used to manufacture the product. At
the same time, the product may have some customized, individual features that
require the use of a job order cost system.
Consider, for example, the automobile manufacturer Ford Motor Company.
Each vehicle at a given plant goes through the same assembly line, but Ford uses
different materials (such as seat coverings, paint, and tinted glass) for different
vehicles. Similarly, Kellogg’s Pop-Tarts® toaster pastries go through numerous
standardized processes—mixing, fi lling, baking, frosting, and packaging. The
pastry dough, though, comes in different fl avors—plain, chocolate, and graham—
and fi llings include Smucker’s® real fruit, chocolate fudge, vanilla creme, brown
sugar cinnamon, and s’mores.
A cost-benefi t trade-off occurs as a company decides which costing system to
use. A job order cost system, for example, provides detailed information related
to the cost of the product. Because each job has its own distinguishing characteristics, the system can provide an accurate cost per job. This information is useful
in controlling costs and pricing products. However, the cost of implementing a
job order cost system is often expensive because of the accounting costs involved.
On the other hand, for a company like Intel, which makes computer chips, is
there a benefi t in knowing whether the cost of the one-hundredth chip produced
is different from the one-thousandth chip produced? Probably not. An average
cost of the product will suffi ce for control and pricing purposes.
In summary, when deciding to use one of these systems, or a combination
system, a company must weigh the costs of implement
