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Notes_Chapter_04 - Chapter 4 SYSTEMS DESIGN PROCESS COSTING...

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Chapter 4: SYSTEMS DESIGN: PROCESS COSTING I. COMPARISON: JOB ORDER vs. PROCESS COST SYSTEMS A. Review of the two basic cost accounting systems 1. Job Order Cost System 0. Accumulate DM used, DL, and OH applied by job (per unit or batch of units) 1. Use if customize orders or produce many different products. 2. Process Cost System 2. Accumulate DM used, DL, and OH applied by department or process 3. Use if have a continuous production process of similar products 4. Difficult to identify the specific inputs that go into producing one unit 5. ex., oil refineries, electronics, flour mill, paint Consider information needs and cost benefits to determine which type of system to use B. Similarities Job order and process cost systems are similar in the way production costs are recorded: 0. Accumulation of materials , labor and overhead costs is the same as in job order costing. 1
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o Cost Flows to assign product costs to inventory are basically the same: C. Differences o T he methods of assigning the costs to individual units of inventory differ significantly. In a process costing environment, materials, labor, and manufacturing overhead are added in multiple departments —must be recorded as work-in-process inventory in each manufacturing department which flow in sequence from one department to another.
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