Warr22e_IM_TM_Ch20 - Transparency Master 20-1 JOB ORDER VS...

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Transparency Master 20-1 JOB ORDER VS PROCESS COSTING Job Order Costing Used by manufacturers who make special orders, customized products, or standard products produced in batches. Process Costing Used by manufacturers who mass produce large quantities of identical units in a continuous flow.
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Transparency Master 20-2 SIMILARITIES IN JOB ORDER AND PROCESS COSTING Both systems determine a product cost by measuring the amount of direct materials and direct labor used and allocating over- head costs. Both systems allocate overhead using a predetermined overhead rate(s). Both systems maintain perpetual inventory records with subsidiary ledgers for materi- als, work in process, and finished goods.
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Transparency Master 20-3 DIFFERENCES IN JOB ORDER AND PROCESS COSTING Job Order: Costs are accumulated by job. Cost to Make One Unit = Cost of the Job No. of Units in the Job Process Costing: Costs are accumulated by department for a time period (for example, one month). Department’s Cost Cost to Make One Unit = for the Month in One Department No. of Units Produced during the Month To find the total unit cost, add the unit costs in- curred in each department.
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Transparency Master 20-4 FLOW OF COSTS IN A PROCESS COST SYSTEM Assume that Advanced Technologies, a computer manufacturer, makes its product in three departments: Assembly, Testing, and Pack- ing. Materials and component parts are added in the Assembly Depart- ment. Packing materials are added in the Packing Department. Materials WIP—Assembly Cost of Materials Materials Cost of units materials used in Direct Labor transferred purchased assembly Overhead to testing Materials (applied) used in packing WIP—Testing Costs from Cost of units assembly transferred Direct Labor to packing Overhead (applied) WIP—Packing Costs from Cost of testing completed Materials units Direct Labor Overhead (applied) Finished Goods Cost of Goods Sold Cost of Cost of Cost of completed units sold units sold units Transparency Master 20-5
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FIFO PROCESS COSTING DEMONSTRATION PROBLEM ADVANCED TECHNOLOGIES —ASSEMBLY DEPARTMENT Advanced Technologies produces notebook computers in three de- partments: Assembly, Testing, and Packing. Prior to the start of the production process, all the materials and component parts needed to assemble a computer are placed into a “kit.” Manufacturing begins when the Assembly Department receives a kit and begins putting the computer together. Therefore, all materials are added at the beginning of work in the Assembly Department. Conversion costs are added evenly throughout the assembly process. Assume that the Assembly Department of Advanced Technologies
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Warr22e_IM_TM_Ch20 - Transparency Master 20-1 JOB ORDER VS...

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