Ch04 - 4-1 Chapter 4 Systems Design: Process Costing...

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4-1 Chapter 4 Systems Design: Process Costing Both systems assign material, labor and overhead costs to products and they provide a mechanism for computing unit product cost. Both systems use the same manufacturing accounts, including Manufacturing Overhead, Raw Materials, Work in Process, and Finished Goods. The flow of costs through the manufacturing accounts is basically the same in both systems. Similarities Between Job-Order and Process Costing Process costing is used when a single product is produced on a continuing basis or for a long period of time. Job-order costing is used when many different jobs are worked on each period. Process costing systems accumulate costs by department. Job-order costing systems accumulated costs by individual jobs. Process costing systems compute unit costs by department. Job-order costing systems compute unit costs by job on the job cost sheet. Differences Between Job-Order and Process Costing
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4-2 Process costing is used for products that are: a. Different and produced continuously. b. Similar and produced continuously. c. Individual units produced to customer specifications. d. Purchased from vendors. Process costing is used for products that are: a. Different and produced continuously. b. Similar and produced continuously. c. Individual units produced to customer specifications. d. Purchased from vendors. Quick Check Process costing is used for products that are: a. Different and produced continuously. b. Similar and produced continuously. c. Individual units produced to customer specifications. d. Purchased from vendors. Quick Check Processing Departments Any location in an organization where materials, labor or overhead are added to the product. The activities performed in a processing department are department are performed uniformly performed uniformly on all units of production. Furthermore, the output of units of production. Furthermore, the output of a processing department must be homogeneous homogeneous .
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4-3 Learning Objective 1 Record the flow of materials, labor, and overhead through a process costing system. Finished Goods Cost of Goods Sold Work in Process Direct Materials Direct Labor Manufacturing Overhead Flow of Materials, Labor and Overhead Costs Finished Goods Cost of Goods Sold Direct Labor Manufacturing Overhead Jobs Costs are traced and applied to individual jobs in a job-order cost system. Direct Materials Flow of Materials, Labor and Overhead Costs
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4-4 Finished Goods Cost of Goods Sold Direct Labor Manufacturing Overhead Processing Department Costs are traced and applied to departments in a process cost system. Direct Materials Flow of Materials, Labor and Overhead Costs For purposes of this example, assume there are two processing departments – Departments A and B.
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Ch04 - 4-1 Chapter 4 Systems Design: Process Costing...

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