Acct 611 Chapter 4 Notes

Acct 611 Chapter 4 Notes - CHAPTER4 PROCESSCOSTING AND...

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PROCESS COSTING AND  HYBRID PRODUCT-COSTING SYSTEMS Chapter Overview 1. COMPARISON OF JOB-ORDER COSTING AND PROCESS COSTING Both systems  have similar objectives: accumulate  total product  costs and   assign those costs to each unit manufactured. A company  that uses a job-costing system  produces goods by order or in distinct  batches, and  the products  tend  to differ significantly from each other. With a  process-costing system,  a company  works in a  repetitive  production environment,  manufacturing  a large number  of like units in a  continuous  flow.  Industries that use process costing include  those  involved  with  paper, petroleum,  lumber, and  chemicals.   Cost accumulation:  Costs in a job-order system  are accumulated  by job; in a  process-costing system, the costs are accumulated  by department  or  process. Flow of costs:  The flow of costs through  general ledger accounts  is similar  in both systems: through  Work in Process, to Finished  Goods, to Cost of  Goods Sold.  In a sequential production  operation, each department   establishes its own  Work-in-Process account.   2. EQUIVALENT UNITS Equivalent units  is a key concept in process costing.  The term refers to  the amount  of manufacturing  activity that has been applied  to a batch of  physical units after adjusting  for the stage of completion. 38
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Acct 611 Chapter 4 Notes - CHAPTER4 PROCESSCOSTING AND...

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