Ch 4 nOTES - CHAPTER4 Process Costing CHARACTERISTICS OF...

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CHAPTER 4 Process Costing CHARACTERISTICS OF PROCESS MANUFACTURING Cost accounting systems should be designed to fit the nature of the manufacturing operation. Process costing works well whenever relatively homogeneous products pass through a series of processes and receive similar amounts of manufacturing costs. A process is a series of operations performed on the product, such as mixing, molding, or packaging. Job-order costing works well whenever products pass through a series of processes that deal out different amounts of manufacturing costs. The manufacture of nearly any product requires three types of cost: 1. Direct materials 2. Direct labor 3. Manufacturing overhead The job-order costing system is designed to trace costs to a job. A process-costing system traces the costs to the process, instead of the job. The same accounts are used in the process-costing system as in a job-order costing system with the exception of the number of Work-in-Process accounts. A different Work-in-Process account is required for each processing department. 58
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59 Chapter 5 The major differences between process costing and job-order costing are summarized as follows: 1. Homogeneous units pass through a series of similar processes. 1. Unique jobs are worked on during a time period. 2. Costs are accumulated by processing department. 2. Costs are accumulated by individual job. 3. Unit costs are computed by dividing the processing departments’ costs by output. In addition, output is measured in equivalent units, not in units produced. 3. Unit costs are determined by dividing the total costs on the job-order cost sheet by the number of units in the job. 4. The production report provides the detail for the Work-in-Process account for each processing department. 4.
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This note was uploaded on 02/28/2012 for the course ACCT 2361 taught by Professor Severance during the Spring '08 term at Texas State.

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Ch 4 nOTES - CHAPTER4 Process Costing CHARACTERISTICS OF...

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