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1 - Lecture 1 Systems Design Process Costing Similarities...

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Systems Design: Process Costing Lecture 1
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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 basically the same in both systems.
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Differences Between Job-Order and Process Costing Process costing : a single product produced on a continuing basis or for a long period of time. Job-order costing : different jobs are worked on each period. Process costing systems accumulate costs by department. Job-order costing systems accumulated costs by individual jobs. Process costing systems use department production reports to accumulate costs. Job-order costing systems use job cost sheets to accumulate costs. Process costing systems compute unit costs by department. Job-order costing systems compute unit costs by job.
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What is a Processing Department? Any location in an organization where materials, labor or overhead are added to the product. The activities performed in a processing The activities performed in a processing department are department are performed uniformly performed uniformly on all on all units of production. Furthermore, the output of units of production. Furthermore, the output of a processing department must be a processing department must be homogeneous homogeneous . .
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Sequential vs. Parallel Processing Sequential processing means that units Sequential processing means that units flow in a sequence from one flow in a sequence from one department to another. department to another. Parallel processing is used when Parallel processing is used when after a point, some units go through after a point, some units go through different processing departments different processing departments than others. For example, a than others. For example, a petroleum refinery separates crude petroleum refinery separates crude oil into products like gasoline, jet oil into products like gasoline, jet fuel, and heating oil. fuel, and heating oil.
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Comparing Job-Order and Process Costing Finished Goods Cost of Goods Sold Work in Process Direct Materials Direct Labor Manufacturing Overhead
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Comparing Job-Order and Process Costing Finished Goods Cost of Goods Sold Direct Labor Manufacturing Overhead Jobs Costs are traced and applied to individual jobs in a job-order cost system. Direct Materials
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Comparing Job-Order and Process Costing Finished Goods Cost of Goods Sold Direct Labor Manufacturing Overhead Processing Department Costs are traced and applied to departments in a process cost system. Direct Materials
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Equivalent Units of Production Equivalent units are the product of the number of partially completed units and the percentage completion of those units.
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