cOST ACCY Chapter 17 Outlines

cOST ACCY Chapter 17 Outlines - Chapter Outlines CHAPTER 17...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter Outlines- CHAPTER 17 – PROCESS COSTING A. Cost Management Challenges. There are 3 questions addressed in this chapter. 1. How should costing systems measure costs of products, services, and operations when outputs are numerous and indistinguishable? 2. How can organizations ensure that they produce reliable process-cost data that supports decision- making to improve profitability? 3. How should organizations recognize and measure the costs of spoilage and waste? B. Learning Objectives – This chapter has 4 learning objectives. 1. The chapter presents a five-step procedure for assigning process costs to units of product. 2. Two methods of process costing are described. They are the weighted-average method and the first- in, first-out (FIFO) method. 3. Chapter 7 demonstrates how to prepare, interpret and analyze process cost information. 4. The appendix compares job costing and process costing. C. Process costing is a method for assigning product costs to units of product when all units of product are virtually the same. Products are completed in a short time, and costs for a single period can be averaged over the number of units produced. 1. With process costing, costs are not traced to units of product. Instead, all production costs (unit-level and otherwise) are assigned, or allocated based on total production costs and total units produced. 2. Job costing and process costing differ in the way costs are assigned, and they differ because of differences in product characteristics. With job costing, many costs are traceable to jobs, or can be assigned to specific jobs using cost-driver rates. For products in a process costing environment, all costs must be assigned using a cost-driver approach. The key difference is that the only cost-driver is the actual number of units produced. D. A very basic model of process costing assumes there are only two cost categories – materials and conversion costs. Materials costs (also called direct materials) are unit-level costs, but they are assigned to units of product based on the cost of materials and the actual number of units produced. Conversion costs include all other costs for resources used besides materials. These other costs may be batch, product, or facility-level costs. Resources are recorded as processes rather than activities. Simplifying assumptions in the basic process costing model presented in Chapter 7 preclude the use of ABC. E. The simplest case for assigning costs using a process costing approach assumes all production is started and completed within a single accounting period. This simplifying assumption makes it easier to see
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
how materials and conversion costs are used and applied to units of product. If all units of product are completed in one month, there is no work-on-process inventory. It is the presence of WIP inventory that makes process costing complex. 1.
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 8

cOST ACCY Chapter 17 Outlines - Chapter Outlines CHAPTER 17...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online