Ch 06 Summary - CHAPTER 6 PRODUCT AND SERVICE COSTING: A...

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CHAPTER 6 PRODUCT AND SERVICE COSTING: A PROCESS SYSTEMS APPROACH Process costing exposes you to a different method of collecting costs for products. The material in this chapter is generally difficult because of the amount of detail. LEARNING OBJECTIVES After studying Chapter 6, you should be able to: 1. Describe the basic characteristics of process costing, including cost flows, journal entries, and the cost of production report. 2. Describe process costing for settings without beginning or ending work-in-process inventories. 3. Define equivalent units, and explain their role in process costing. 4. Prepare a departmental production report using the FIFO method. 5. Prepare a departmental production report using the weighted average method. 6. Prepare a departmental production report with transferred-in goods and changes in output measures. 7. Describe the basic features of operation costing. 8. Explain how spoilage is treated in a process costing system. KEY TOPICS The following topics are covered in Chapter 6 (related learning objectives are listed by topic): 1. Process Costing Systems: Basic Operational and Cost Concepts (LO 1) 2. Process Costing with No Work-In-Process Inventories (LO 2) 3. Process Costing with Ending Work-In-Process Inventories (LO 3) 4. FIFO Costing Method (LO 4) 5. Weighted Average Costing Method (LO 5) 6. Treatment of Transferred-In Goods (LO 6) 7. Operation Costing (LO 7) 8. Appendix: Spoiled Units (LO 8) I. PROCESS COSTING SYSTEMS: BASIC OPERATIONAL AND COST CONCEPTS At this point, it is usually helpful to compare and contrast process costing with job-order costing. The focus of this chapter will be on the process costing environment. Comparison of Job-Order and Processing Costing Job-Order Costing Process Costing 1. Wide variety of distinct products 1. Homogeneous products 2. Cost accumulated by the job 2. Costs accumulated by process or department 3. Unit cost computed by dividing total job costs by units produced on that job 3. Unit cost computed by dividing process costs of the period by the units produced in that period 33
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There are two key differences between the cost flows for a process costing system and a job-order costing system. First, costs are accumulated by the job in a job-order costing system whereas costs are
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Ch 06 Summary - CHAPTER 6 PRODUCT AND SERVICE COSTING: A...

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