Chapter 4-Student-revised

Chapter 4-Student-revised - CHAPTER 4 Notes Systems Design:...

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CHAPTER 4 Notes Systems Design: Process Costing Compiled by: Lei Wang, CPA Certain materials used with permission of J. Fergusson or of McGraw-Hill Companies, Inc. Process Costing – the second type of cost accounting system Typically used by companies that produce large quantities of identical products that are made in long, continuous production runs through a series of process centers (departments) Examples: bricks, drugs, soft drinks, newspapers, food processing, oil and gas refining Focus is not on assigning production costs to specific units, as is job order costing; the focus is on costing the amount of work done for a period of time Process costing systems accumulate costs by depart- ments using department production reports, whereas, Job-order costing systems accumulate costs by individual jobs using job cost sheets . The flow of costs through the manufacturing accounts is basically the same for process and job-order costing, but there is a key fun- damental difference between process and job-order costing systems. In job-order costing, one WIP account is used to accumulate costs for all jobs, but in processing costing, a separate WIP account is maintained for each pro- cessing department (see Exhibit 4-3).
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ACCT 226 – Chapter 4 Page 2 of 10 Review Materials, Labor, and Overhead Cost Entries (pp. 173-174) Equivalent Units of Production Equivalent units need to be calculated because a department usu- ally has some partially completed units
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Chapter 4-Student-revised - CHAPTER 4 Notes Systems Design:...

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