Chapter 05 - Chapter 5 Chapter Process Cost Accounting...

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Unformatted text preview: Chapter 5 Chapter Process Cost Accounting Process General Procedures General Learning Objectives Learning LO1 Recognize the differences between job Recognize order and process cost accounting systems. systems. LO2 Compute unit costs in a process cost Compute system. system. LO3 Assign costs to inventories, using Assign equivalent units of production with the average cost method. average LO4 Prepare a cost of production summary and Prepare journal entries for one department with no beginning inventory. beginning Learning Objectives Learning LO5 Prepare a cost of production summary Prepare and journal entries for one department with beginning inventory. with LO6 Prepare a cost of production summary Prepare and journal entries for multiple departments with no beginning inventory. inventory. Learning Objectives Learning LO7 Prepare a cost of production summary Prepare and journal entries for multiple departments with beginning inventory. departments LO8 Prepare a cost of production summary Prepare with a change in the prior department’s unit transfer cost. department’s Job Order vs. Process Costing Job Job order cost system is appropriate when products are manufactured on a special order basis. special Process cost system is appropriate when similar goods are manufactured in a continuous or mass production operation. continuous Materials and Labor Costs Materials The focus of a process system is the factory The cost center. cost In a process cost system, the costs of In materials and labor are charged directly to the department where they are incurred. department Indirect materials that cannot be directly Indirect associated with a particular department are charged to factory overhead. charged Factory Overhead Costs Factory Overhead costs are accumulated from the Overhead various journals in the same manner as in a job order cost system. order The applicable factory overhead from a service The department is distributed to the production departments. departments. The use of predetermined rates is common in a The process cost system, but overhead is applied to departments rather than to jobs. departments Product Costs in a Process Cost System Cost The total cost of each item produced is the combined The unit costs from the individual departments. unit Costs are recorded by department according to the Costs following procedures: following Service department costs are allocated to the production Service departments. departments. Costs from prior departments are carried over to Costs successive departments. successive Costs of materials and labor directly identifiable with a Costs department, as well as applied overhead, are charged to that department. that Costing Inventories Costing The primary problem in inventory costing is The the allocation of total costs between units finished during the period and units still in process at the end of the period. process The calculation of the degree of completion The of unfinished work in process presents one of the most important and difficult challenges in process costing. challenges Work in Process Inventories Stages of Completion Stages 1. Units started in a prior period and Units completed during the current period. completed 2. Units started and finished during the Units current period. current 3. Units started during the current period Units but not finished by the end of the period. period. Allocating Total Cost Allocating Total cost must be allocated between: Units finished during the period Units still in process at the end of the period Procedures for assigning costs to Procedures inventories: inventories: Average cost method First-in, first-out (FIFO) method Information Needed for Inventory Valuation Inventory Accumulate costs for which the Accumulate department is accountable. department Calculate the equivalent production for Calculate the period. the Compute the unit cost for the period. Summarize the disposition of the Summarize production costs. production Production Report Production At the end of the period, the department At manager submits a report showing the following: following: 1. Number of units in the beginning work in Number process. process. 2. Number of units completed. 3. Number of units in the work in process and Number their estimated stage of completion. their Cost of Production Summary-One Department Department The reporting of production and The related costs in each department involves the following: involves 1. Accumulating costs for which the department Accumulating is accountable. is 2. Calculating equivalent production for the Calculating period. period. 3. Computing the unit cost for the period. 4. Summarizing the disposition of the Summarizing production costs. production Journal Entries for One Department Department Recording Factory Operations Work in Process Materials Work in Process Payroll Work in Process Factory Overhead Factory Overhead Various Accounts xx xx xx xx xx xx xx xx Recording Cost of Goods Completed Finished Goods Work in Process xx xx Cost of Production SummaryCost Multiple Departments When there is more than one department, it is When necessary to keep separate control accounts in the general ledger for recording the costs of operating each department. operating A cost of production summary must be cost prepared for each department along with separate journal entries to record the operations of each department and the transfer of costs. of Cost of Production SummaryCost Multiple Departments (cont.) Costs accumulated in each department Costs are transferred to the next department in the production cycle. the The transferred units and their related The costs are treated as completed units in the one department and as raw materials in the next department. in Cost of Production SummaryCost Multiple Departments (cont.) The transferred-in costs and units from the prior The department are not included in the calculation of unit cost and equivalent units on the next department’s cost of production summary. department’s If there is still another department, the first If department’s costs must be considered in transferring cost to the next department. transferring The first department’s costs are also considered The in the costing of the ending work in process inventory in the second department. inventory Journal Entries for Multiple Departments Departments Record Direct Materials xx xx xx xx xx Factory Overhead Various Accounts xx xx Work in Process – Blanking Work in Process – Forming Work in Process – Finishing Factory Overhead Materials Factory Overhead – Blanking Factory Overhead – Forming Factory Overhead – Finishing Factory Overhead xx xx xx xx Record Direct Labor xx xx xx xx xx Transfers to Various Departments xx xx Work in Process – Blanking Work in Process – Blanking Work in Process – Forming Work in Process – Finishing Factory Overhead Payroll Work in Process – Forming Work in Process – Finishing Work in Process – Forming xx xx Finished Goods Work in Process – Finishing xx xx Record Factory Overhead xx xx xx xx xx xx Work in Process – Blanking Work in Process – Forming Work in Process – Finishing Factory Overhead - Blanking Factory Overhead – Forming Factory Overhead – Finishing BLANKING ⇒ FORMING ⇒ FINISHING BLANKING Department Department Department Finished Goods Not Transferred Transferred Finished goods in a department may not be Finished transferred until the following period. transferred These units should be treated as completed These and priced out at the full unit price. and Their costs should be left in the work in Their process account for financial statement purposes. purposes. Change in Prior Department’s Unit Transfer Costs Unit A prior department’s transfers from two prior different periods will often have different unit costs each month. unit The previous department costs must be The averaged as a separate grouping so that these transferred-in costs can be properly allocated to the products being produced in the department. in ...
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This note was uploaded on 11/29/2009 for the course ACC ACC300 taught by Professor Jones during the Spring '09 term at Central Pennsylvania.

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