Lecture 4 Flashcards
process costing system = ?
masses of identical or similar units of a product/service are being costed
process costing service sector examples?
deposit processing
postal delivery
process costing merchandising examples?
- grain dealing
- processing new magazine subscriptions
process costing manufacturing examples?
- oil refining
- beverages production
process costing synonym?
average costing
when is process costing used?
in manufacturing processes where units are mass-produced identically
instead of job cost records, what is used in process costing?
cost of production report
process control sheet
still 3 manufacturing costs: DM, DL, OH
DL & OH both come under conversion costs (C/C)
when is it necessary to calculate equivalent units?
where partially completed units are on hand at the end of the accounting period
conversion costs = ?
the combination of direct labour & overheads
how is costs per unit calculated?
total costs of DM & CC / equivalent units of work done for DM & CC
cost per unit = cost per equivalent unit for DM + CC
DM = ?
direct materials
CC = ?
conversion costs
WIP = ?
work-in-progress
how does the job costing flow look?
direct materials & direct manufacturing labour go into direct costs
an indirect cost pool is usually manufacturing overhead, with an allocation base of either machine or labour hours - these go into indirect costs
indirect costs and direct costs make up the total cost of the cost object
how are product costs calculated?
total costs of production / total units produced = cost per unit
what complicates the costing process in process costing?
at the end/beginning of periods, units may be partially completed
what is used instead of a job cost record for process costing?
cost of production report (process control sheet)
what are the three manufacturing costs?
direct materials
direct labour
manufacturing overheads
transferred-in costs = ?
costs that have been incurred in a prior department on units that have been moved into a subsequent department
normally include materials, direct labour & overheads
when is the calculation of equivalent units necessary?
where partially completed units are on hand at the end of the accounting period
it converts the quantity of input into an equivalent output unit figure
how are equivalent units calculated?
separately for each input
calculated for direct materials on its own, and for conversion costs on its own
conversion costs = ?
all manufacturing costs other than direct material costs
includes manufacturing labour, indirect materials, energy, plant depreciation etc
when are direct materials added during the process of product assembly?
at the beginning
when are conversion costs added during the process of product assembly?
evenly throughout the process
what is the 5 step process for process costing?
- summarise the flow of physical units of output
- compute output in terms of equivalent units
- compute equivalent-unit costs
- summarise total costs to account for
- assign total costs to units completed and to units in closing work in progress
weighted average process costing method?
calculates the equivalent-unit cost of the work done to date (regardless of the period in which it was done)
it then assigns this cost to equivalent units completed and transferred out of the process AND to equivalent units in closing work-in-progress stock
total of all costs entering the work in progress account (regardless of if it’s from the previous or current period)/ divided by total equivalent units of work done to date
first in, first out (FIFO) process-costing method?
assigns the cost of the previous period’s equivalent units (in opening work-in-progress stock) to the first units completed & transferred out of the process
and then assigns the cost of equivalent units worked on during the current period first to complete beginning stock, then to started & completed new units
finally, units in closing work in progress stock are assigned costs from equivalent units worked on during the current period
what does the FIFO method of process costing assume?
that the earliest equivalent units in the work in progress account are completed first
what is a distinctive feature of the FIFO process costing method?
that work done on opening stock before the current period is kept separate from work done in the current period
