Key Topics•Job-order vs. process costing•Accounting for process cost flows•Apply costs to products•Service department allocations – separate handout4
Job-Order vs. Process Costing4
What is Process Costing?4
Similarities Between Job-Order and Process Costing•Both systems assign material, labor and overhead costs to products and they provide a mechanism for computing unit product cost.•Both systems use the same manufacturing accounts, including Manufacturing Overhead, Raw Materials, Work in Process, and Finished Goods.•The flow of costs through the manufacturing accounts is similar in both systems.4
Differences Between Job-Order and Process Costing4Process CostingJob-Order CostingUsed when a single product is produced on a continuing basis or for a long period of time.Used when many different jobs are worked on each periodAccumulate costs by department.Accumulate costs by individual jobs.Compute unit costs by department.Compute unit costs by job on the job cost sheet.
Process costing is used for products that are:Quick Check 4-7
Processing Departments•A processing department would be a unit that adds material, labor or overhead to the product.•The same process is applied to all products and the output is homogenous.•Products flow in sequence from one department to the next.•For example, a soft drink manufacturer could have:4-8
Accounting for Process Cost Flows4-9
Comparing Job-Order and Process CostingFinishedGoodsFinishedGoodsCost of GoodsSoldCost of GoodsSoldWork inProcessDirect MaterialsDirect MaterialsDirect LaborDirect LaborManufacturing Overhead Manufacturing Overhead 4-10
Comparing Job-Order and Process CostingFinishedGoodsFinishedGoodsCost of GoodsSoldCost of GoodsSoldDirect LaborDirect LaborManufacturing Overhead Manufacturing Overhead JobsJobsCosts are traced andapplied to individualjobs in a job-ordercost system.Costs are traced andapplied to individualjobs in a job-ordercost system.