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Ch.4 - Ch 4 Process Costing and Hybrid Product-Costing...

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Ch. 4 Process Costing and Hybrid Product-Costing Systems ACC2002 Managerial Accounting Qi (Susie) Wang Wang 2013 1
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Comparison of Job-Order Costing and Process Costing Process Costing Job Ͳ order Costing ) Used for production of small, identical, low cost items. ) Mass produced in automated continuous production process. ) Costs cannot be directly traced to each unit of product. Wang 2013 2
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Comparison of Job-Order Costing and Process Costing Process Costing Job Ͳ order Costing Typical process cost applications: Y Petrochemical refinery Y Paint manufacturer Y Paper mill Wang 2013 3
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Comparison of Job-Order Costing and Process Costing Job-order costing Costs accumulated by the job . Work in process has a job-cost sheet for each job . Many unique, high cost jobs. Jobs built to customer order. Process costing Costs accumulated by department or process . Work in process has a production report for each batch of products . A few identical, low cost products. Units continuously produced for inventory in automated process. Wang 2013 4
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Differences Between Job-Order and Process Costing Direct Material Finished Goods Cost of Goods Sold Direct Labor Manufacturing Overhead Jobs The work-in-process account consists of individual jobs in a job-order cost system. Wang 2013 5
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Differences Between Job-Order and Process Costing Direct Material Finished Goods Cost of Goods Sold Products The work-in-process account consists of individual products in a process costing system. Direct Labor & Overhead ( Conversion) When direct labor is a relatively small amount compared to material and overhead, it is often combined with overhead. Wang 2013 6
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Process Cost Flows Direct material Direct labor Applied manufacturing and transferred to during current overhead finished goods period Cost of goods completed Cost of goods sold Work-in-Process Finished Goods Cost of Goods Sold One Production Department Inventory Inventory Wang 2013 7
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Process Cost Flows Direct material Direct labor Applied manufacturing transferred to and transferred to overhead department B finished goods Direct material Direct labor Applied manufacturing overhead during current period Cost of goods completed in department A and Cost of goods completed Finished Goods Inventory Cost of Goods Sold Two Sequential Production Departments Work-in-Process Inventory Work-in-Process Inventory Production Department A Production Department B Cost of goods sold Wang 2013 8
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Journal Entries Costs Accumulation for Department A (Process A) Dr. WIP-Process A XXX Cr. Raw Materials Inventory XXX Dr. WIP-Process A XXX Cr. Wages Payable XXX Dr. WIP-Process A XXX Cr. Manufacturing Overhead XXX Transfer to Next Department (Process B) Dr. WIP-Process B XXX Cr. WIP-Process A XXX Wang 2013 9
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Journal Entries Costs Accumulation for Process B Dr. WIP-Process B XXX Cr. Raw Materials Inventory XXX Dr. WIP-Process B XXX Cr. Wages Payable XXX Dr. WIP-Process B XXX Cr. Manufacturing Overhead XXX Goods Completed Dr. Finished Goods Inventory XXX Cr. WIP-Process B
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