1 / 24

CHAPTER 16

CHAPTER 16. Process Costing. Cost Accounting Systems. determine the costs associated with products (or services). _________ Cost System (last chapter) used for unique or custom ordered products _________ Cost System ( this chapter) is used for mass produced items.

alea-avila
Télécharger la présentation

CHAPTER 16

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. CHAPTER 16 Process Costing

  2. Cost Accounting Systems determine the costs associated with products (or services). • _________ Cost System (last chapter) • used for unique or custom ordered products • _________Cost System (thischapter) • is used for mass produced items

  3. Process Costing • Process costing is used to attach cost to units produced that are • Identical and low in cost • Mass produced • Manufactured with an automated and continuous flow of production • _____________ is used when costs cannot be directly traced to each individual unit • _____________ = department or process rather than the individual job.

  4. Flow of Costs • We must be able to understand the flow of costs through a process costing system. Remember though • The flow of costs is similar to that for a job cost system except • Each department or process has its own WIP inventory account • The products may go through several processing departments ________ being transferred to Finished Goods Inventory.

  5. Job Cost Sheets Dept. A and Dept. B Dept. B Job Order and Process Cost Systems Compared Job Order Cost System Direct materials Direct labor Finished goods Factory overhead Process Cost System Direct materials Finished goods Dept. A Direct labor Factory overhead Direct labor Factory overhead

  6. determine a product costby measuring the amount of direct materials and direct labor used and allocating overhead costs. • allocate overhead using a predetermined overhead rate(or activity-based costing). • maintain perpetual records with subsidiary ledgers for materials, work in process, and finished goods. Both systems:

  7. Job Costing versus Process Costing Process costing The cost of goods transferred to finished goods equals the number of completed units times the ______________________ Job order costing The cost of goods transferred to finished goods is equal to the sum of all of the completed jobs for that period

  8. Cost Categories • At its simplest, we use 2 - 3 cost categories in the first department • _____________ • added all at the beginning of the process • _____________– (direct labor and overhead) • added evenly throughout each process • In a subsequent processing departments, we will have an additional cost category • _____________ • costs attaching in all previous departments

  9. Flow of Costs in a Process Cost System DM Direct materials used in production DL Direct labor used in production FOH – Melting WIP – Melting Finished Goods DM Actual costs incurred DL Cost of Goods Sold WIP – Casting FOH – Casting Actual costs incurred DL

  10. Flow of Costs in a Process Cost System FOHA Factory overhead applied to work in process FOH – Melting WIP – Melting Finished Goods DM FOHA Actual costs incurred DL FOHA Cost of Goods Sold WIP – Casting FOH – Casting FOHA Actual costs incurred DL FOHA

  11. Flow of Costs in a Process Cost System FOH – Melting WIP – Melting Finished Goods DM FOHA Actual costs incurred TRAN DL FOHA Cost of Goods Sold WIP – Casting FOH – Casting TRAN FOHA Actual costs incurred DL FOHA TRAN Cost of goods transferred to WIP – Casting

  12. Flow of Costs in a Process Cost System COGM Cost of goods manufactured and transferred to finished goods FOH – Melting WIP – Melting Finished Goods DM FOHA Actual costs incurred TRAN COGM DL FOHA Cost of Goods Sold WIP – Casting FOH – Casting TRAN COGM FOHA Actual costs incurred DL FOHA

  13. Flow of Costs in a Process Cost System SOLD Finished goods sold FOH – Melting WIP – Melting Finished Goods DM FOHA SOLD Actual costs incurred TRAN COGM DL FOHA Cost of Goods Sold WIP – Casting FOH – Casting SOLD TRAN COGM FOHA Actual costs incurred DL FOHA

  14. Flow of Costs in a Process Cost System FOH – Melting WIP – Melting Finished Goods DM FOHA SOLD Actual costs incurred TRAN COGM DL FOHA Cost of Goods Sold WIP – Casting FOH – Casting SOLD TRAN COGM FOHA Actual costs incurred DL FOHA Summary of cost flows

  15. Four Step Program • To attach cost to the units worked on during the period, we follow a five step process • 1. Summarize the physical flow of units • 2. Calculate the equivalent units of production. • 3. Calculate Costs per Equivalent Unit for each component of cost. • 4. Assign costs to the units completed and transferred out and to the WIP EI units. • After the four steps are completed, we will prepare the production cost report.

  16. Beginning and Ending WIP Inventories • We need to make an assumption about how costs flow through a department. • _____________ is where we will focus our study and will be used in all of our problems. • We will not cover the FIFO method.

  17. The Four Steps… • Step 1: Determine the physical flow of goods. • We will summarize the actual units that were worked on during the month: Beginning Inventory (BI) + Units Started = Total Number of Units Accounted for • Then reconcile to the actual units transferred out to the next dept. during the month: Completed & Transferred Out (C&T Out) + Ending Inventory (EI) = Total Number of Units Accounted for

  18. Comments • We make separate unit calculations for direct materials and conversion costs (DL and FOH) because • They are typically added at different times. • If direct materials are all added at the beginning of the process, then any units left on hand will be ______% complete with respect to the materials.

  19. Step 2: Equivalent units • Compute _________________of Production: In accounting for the units in process during the period, we must compute the equivalent units worth of work done during the period for • Material costs • Conversion costs • Direct Labor • Factory Overhead

  20. Question C2 For the current period, PencilCo started 15,000 units and completed 10,000 units, leaving 5,000 units in process 30 percent complete. How many equivalent units of production did PencilCo have for the period? a. 10,000 b. 11,500 c. 1,500 d. 15,000

  21. Step 3: Calculating Costs per Equivalent Unit • Once you know how many equivalent units of material, labor and OH have been completed on all units in process during the period, you can express _________________________ • Cost incurred to date / equivalent units • Calculate cost/EU for each component of cost • direct materials and • conversion costs (DL & FOH).

  22. Step 3: Calculating Costs per Equivalent Unit (Weighted Average) • We focus on the equivalent units of work done in the previous period and in the current period. • The W/A method combines the Costs of Beginning Inventory in Process with Costs Incurred during the period.

  23. Step 4: Assigning & Reconciling Costs • Multiply these unit costs times the equivalent units worth of work done on • The units completed and transferred out during the period. • The units left in ending inventory • The total of the cost of units completed and transferred out during the period Goes out of WIP(1) and into WIP(2). • The Cost of units left remains in ending WIP inventory

  24. Now on to the Sample Problem

More Related