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Unformatted text preview: 16 CHAPTER STUDY OBJECTIVES After studying this chapter, you should be able to: 1. Understand who uses process cost systems. 2. Explain the similarities and differences between job order cost and process cost systems. 3. Explain the flow of costs in a process cost system. 4. Make the journal entries to assign manufacturing costs in a process cost system. 5. Compute equivalent units. 6. Explain the four steps necessary to prepare a production cost report. 7. Prepare a production cost report. *8. Compute equivalent units using the FIFO method. *Note: All asterisked (*) items relate to material contained in the Appendix to the chapter. The Navigator PREVIEW OF CHAPTER 16 In contrast to job order cost accounting, which focuses on the individual job, process cost accounting focuses on the processes involved in mass-producing products that are identical or very similar in nature. The primary objective of the chapter is to explain and illustrate process cost accounting. The content and organization of this chapter are as follows: PROCESS COST ACCOUNTING Nature of Process Cost Systems Equivalent Units Uses Similarities and Differences Physical Units Equivalent Units Unit Production Costs Cost Reconcilia- tion Schedule Production Cost Report Weighted-Average Method Refinements Production cost report The Navigator Comprehensive Example of Process Costing Process Cost Flow Assignment of Manufacturing Costs of Production Chapte P ROCESS COSTING The Navigator Scan Study Objectives Read Preview Read Chapter Review Work Demonstration Problem Answer True-False Statements Answer Multiple-Choice Questions Match Terms and Definitions Solve Exercises 16-2 Kimmel Accounting: Tools for Business Decision Making _____________________________________________________________________________ CHAPTER REVIEW Process Manufacturing and Accounting 1. (S.O. 1) Process cost systems are used to apply costs to similar products that are mass produced in a continuous fashion, such as the production of ice cream, steel or soft drinks. In comparison, costs in a job order cost system are assigned to a specific job, such as the construction of a customized home, the making of a motion picture, or the manufacturing of a specialized machine. 2. (S.O. 2) Job order cost and process cost systems are similar in that (a) both use the same three manufacturing cost elements of direct materials, direct labor, and manufacturing overhead; (b) both accumulate costs of raw materials by debiting Raw Materials Inventory, factory labor by debiting Factory Labor, and manufacturing overhead costs by debiting Manufacturing Overhead; and (c) both flow costs to the same accounts of Work in Process, Finished Goods Inventory, and Cost of Goods Sold....
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This note was uploaded on 08/02/2009 for the course BUAD 305 taught by Professor Davila during the Fall '07 term at USC.
- Fall '07