ac102_ch4 - Revised Summer 2010 CHAPTER 4 SYSTEMS DESIGN:...

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

View Full Document Right Arrow Icon
Revised Summer 2010 Page 1 of 16 CHAPTER 4 SYSTEMS DESIGN: PROCESS COSTING Key Terms and Concepts to Know Differences between Job-Order Costing and Processing Costing: Processing costing accumulates manufacturing costs (raw material, direct labor and manufacturing overhead) by processing department. Job-order costing accumulates manufacturing costs by job. Process costing uses a work-in-process account for each department whereas job- order costing uses one work-in-process account for all jobs. In process costing, the flow of costs through the work-in-process accounts follows the flow of units being produced through the manufacturing departments. When the units are completed in one department and transferred to the next department, the costs incurred to date for those units are transferred to the next department’s work -in-process inventory account. Production Report: The Production Report replaces the Job Cost Sheet as the key document in process costing. A production report is prepared for each work-in-process account to assign the total costs incurred to the units completed and transferred to the next department (or finished goods inventory if they are ready for sale) and to the units remaining in work-in-process in three major steps: o first by analyzing the flow of units through the work-in-process account o second by accumulating the costs added to work-in-process during the period and the costs already present in the beginning balance in work-in- process o third by assigned the total costs in work-in-process to the units transferred out and the units still in process. Equivalent Units of Production Weighted Average Method: At the end of most accounting periods, the balance in work-in-process inventory is not zero. This means incomplete units are still in process and must be assigned costs in proportion to how complete they are with respect to each of direct materials, direct labor and manufacturing overhead. To simplify the calculations, partially completed units are converted into equivalent whole units for each type of cost. For example, if there are six units in process at the end of the period and one-third of the direct materials needed for a complete
Background image of page 1

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

View Full DocumentRight Arrow Icon
Revised Summer 2010 Page 2 of 16 unit has been added to each unit, then the six incomplete units are the equivalent of two complete units of direct materials. Units completed and transferred out are always 100% complete for all types of costs. Key Topics to Know Production Report The production report is completed in four steps: Physical Units STEP 1: Work in Process Units Beginning balance + Started into production = Units to be Accounted For STEP 2: Equivalent Units Materials Labor Overhead Completed and Transferred Out + Ending balance = Units Accounted For Total STEP 3A: Work in Process Dollars Beginning balance + Costs added during the period = Costs to be Accounted For STEP 3B: Cost per Equivalent Unit STEP 4: Costs Assigned Completed and Transferred Out + Ending balance = Costs Accounted For
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.

Page1 / 16

ac102_ch4 - Revised Summer 2010 CHAPTER 4 SYSTEMS DESIGN:...

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