ORIE_350_lecture__process_costing_Oct_26

ORIE_350_lecture__process_costing_Oct_26 - ORIE 350 October...

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Unformatted text preview: ORIE 350 October 26, 2006 Process Costing Prelim Tuesday @ 7:30 PM A - Lee Hollister Hall Room B-14 Leland - Z Kimball Hall Room B-11 (bring ID) Homework #4 through #8 inclusive is on the exam. COMPARISON OF JOB-ORDER COSTING AND PROCESS COSTING Both product-costing systems have similar objectives: accumulate total product costs and assign those costs to each unit manufactured. A company that uses a job-costing system produces goods by order or in distinct batches, and the products tend to differ significantly from each other. With a process-costing system, a company works in a repetitive production environment, manufacturing a large number of like units in a continuous flow. Industries that use process costing include those involved with paper, petroleum, lumber, disposable diapers, and chemicals. Cost accumulation Costs in a job-order system are accumulated by job; in a process-costing system, the costs are accumulated by department or process. Flow of costs The flow of costs through general ledger accounts is similar in both systems: through Work in Process, to Finished Goods, to Cost of Goods Sold. In a sequential production operation, each department establishes its own Work-in-Process account. Equivalent units Equivalent units is a key concept in process costing. The term equivalent unit cost refers to the amount of conversion and direct-materials dollars that have been applied to physical units after adjusting for the stage of completion. Equivalent Units Units in the ending Work-in-Process Inventory are only partially completed and may be in different stages of production. For example, 100% of the materials may be present in the product, but only 50% of the conversion work (labor and overhead) may have been performed. Treatment of Conversion Costs Conversion costs are usually added continuously throughout the process. continuously throughout the process....
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This note was uploaded on 04/05/2009 for the course ORIE 350 taught by Professor Callister during the Summer '08 term at Cornell University (Engineering School).

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ORIE_350_lecture__process_costing_Oct_26 - ORIE 350 October...

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