C1104s - 1 ACCT 220 Systems Design: Process Costing...

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Unformatted text preview: 1 ACCT 220 Systems Design: Process Costing (Chapter 4) Week 4 2 System Design: Process Costing The Plan: I. Job-Order Costing vs. Process Costing II. Overview of Process Costing III. Equivalent Units IV. Weighted-Average Method V. FIFO Method (Appendix 4A) 3 I. Job-Order Costing vs. Process Costing Similarities: 1. Same basic elements of manufacturing costs direct materials direct labor manufacturing overhead conversion cost = DL + M.OH 2. Same basic manufacturing accounts 3. Same basic flow of costs through the manufacturing accounts 4 I. Job-Order Costing vs. Process Costing Differences: Job-Order Costing Process Costing 1. Production Characteristics Many different jobs are A single product is produced worked on during each either on a continuous basis period, with each job having or for long periods of time. different production All units of product are requirements. identical. 2. Cost Accumulation Costs are accumulated Costs are accumulated by individual job by department (or technological process) 3. Document for Controlling the Accumulation of Costs Job cost sheet Department production report 4. Unit costs computation Unit costs are computed Unit costs are computed by job on the job cost sheet by department on departmental production report 5 II. Overview of Process Costing Processing Department (potato preparation) Processing Department (cooking) Processing Department (inspecting and packing) Basic raw material inputs (potatoes) Partially completed goods (cooked potato chips) Partially completed goods (prepared potatoes) Finished Goods (packaged potato chips) Processing costs Processing costs Processing costs Sequential Processing Departments (Exhibit 4-2) In general, direct materials, direct labor, and manufacturing overhead can be added in each department. In practice, labor and overhead are often combined into one cast that is typically referred to as conversion 6 II. Overview of Process Costing Costs are accumulated by department, including: cost of units transferred in materials added in the department labor and OH incurred in the department There is a separate WIP account for each processing department unit processing cost is computed for each department 7 II. T-account Model of Process Costing Flows Exhibit 4-3 Transferred-in cost 8 III. Equivalent units of production unit cost = total costs ÷ units processed Complication 1 : there are partially processed units at the end of a period Example : During Jan., Department A worked on 100 units; 80 units were completed and the remainder was 60% complete. The amount of work done by the department is equivalent to 80 + 20 × 60% = 92 units The amount of work done is measured in equivalent units of production....
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This note was uploaded on 01/10/2012 for the course ACCT 220 taught by Professor Kirillnovoselov during the Fall '08 term at HKUST.

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C1104s - 1 ACCT 220 Systems Design: Process Costing...

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