cornerstones chp 5

cornerstones chp 5 - May 26, 2011 Accounting 2102 1 Chapter...

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Unformatted text preview: May 26, 2011 Accounting 2102 1 Chapter 5 Process Costing Why Choose Process Costing ? determined by the operating environment homogeneous products that pass through a series of processes where they receive similar amounts of costs what are processes ? an activity that brings the product closer to completion . . . takes place in a department where product costs are added (each department has a WIP account) sequential processes parallel processes May 26, 2011 Accounting 2102 2 Department E Chain Gang, Inc. Lets assume youre the owner/manager of the company. What would you need to know about each necklace to ensure the companys success in the market? Would it make sense for you to trace production costs to individual necklaces? Why? May 26, 2011 Accounting 2102 3 Chain Gang, Inc. mass produces beaded necklaces. Production occurs in three sequential production departments: Stringing, Clasping, and Packaging. So how do we determine how much it costs us to produce one necklace? We Use a Production Cost Report The production cost report summarizes the manufacturing activity that occurs in a processing department. The report is basically a reconciliation . . . of units . . . units to account for = units accounted for of costs . . . costs to account for = costs accounted for The goals of the report are to . . . compute the cost of goods transferred out value ending WIP May 26, 2011 Accounting 2102 4 There are issues we need to address before moving on . . . Define Work in Process . . . The presence of WIP presents two issues: 1. how do we deal with beginning WIP?...
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cornerstones chp 5 - May 26, 2011 Accounting 2102 1 Chapter...

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