Chapter 4 - Process costing and hybrid product-costing systems. After completing this chapter, you should be able to: List and explain the similarities and important differences between job-order and process costing, prepare journal entries to record the flow of costs in a process-costing system with sequential production departments, prepare a table of equivalent units under weighted-average process costing,...
Trang 1Process Costing and Hybrid Product-Costing Systems
Chapter 4
Trang 2Comparison 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
Trang 3Process Cost Flows
Direct material
Direct labor
Applied manufacturing and transferred to during current
One Production Department
Cost of goods completed Cost of goods sold
Cost of Goods Sold
Trang 4Process 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 sold
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
Trang 5Equivalent Units: A Key Concept
Costs are accumulated for a period of time for
products in work-in-process inventory
Products in work-in-process inventory at the
beginning and end of the period are only partially
complete
Equivalent units is a concept expressing these
partially completed products as a smaller number of fully completed products.
Costs are accumulated for a period of time for
products in work-in-process inventory
Products in work-in-process inventory at the
beginning and end of the period are only partially
complete
Equivalent units is a concept expressing these
partially completed products as a smaller number of fully completed products.
Trang 6Equivalent Units Example
Two half completed products are equivalent to one completed product.
So, 10,000 units that are 70% complete are equivalent to 7,000 complete units.
Trang 7Calculating and Using Equivalent Units of Production
To calculate the direct materials and conversion costs per
equivalent unit for the period:
Materials
cost per
equivalent
unit
= Materials equivalent units for Materials cost for the period
the period
Conversion
cost per
equivalent
unit
= Conversion cost for the period
Conversion equivalent units for
the period
Trang 8Departmental Production Report
Production Report
Analysis of
physical flow
of units.
Calculation
of equivalent
units.
Computation
of unit costs total costs Analysis of
Trang 9Equivalent Units of Production –
Weighted-Average Method
The weighted-average method
Makes no distinction between work done in the prior period
and work done in the current period.
Blends together units and costs from the prior period and the current period.
The FIFO method is a more complex method and is rarely used in practice.
Trang 10Direct Material Conversion Total Work in Process, March 1 $ 50,000 $ 7,200 $ 57,200 Costs incurred during March 90,000 193,500 283,500 Total costs to account for $ 140,000 $ 200,700 $ 340,700 Equivalent units 50,000 45,000
Cost per equivalent unit $ 2.80 $ 4.46 $ 7.26
Computation of unit costs
Production Report Example
Trang 11Production Report Example
Analysis of total costs
Cost of goods completed and transferred during March
40,000 units x $7.26 per equivalent unit $ 290,400
Costs remaining in work-in-process on March 31
Direct Material:
10,000 equivalent units x $2.80 per equivalent unit $ 28,000
Convserion:
5,000 equivalent units x $4.46 per equivalent unit 22,300
Trang 12Production Report Example
Analysis of total costs
Cost of goods completed and transferred during March
40,000 units x $7.26 per equivalent unit $ 290,400
Costs remaining in work-in-process on March 31
Direct Material:
10,000 equivalent units x $2.80 per equivalent unit $ 28,000
Convserion:
5,000 equivalent units x $4.46 per equivalent unit 22,300
Total cost of March 31 work-in-process 50,300
Trang 13Production Report Example
Analysis of total costs
Cost of goods completed and transferred during March
40,000 units x $7.26 per equivalent unit $ 290,400
Costs remaining in work-in-process on March 31
Direct Material:
10,000 equivalent units x $2.80 per equivalent unit $ 28,000
Convserion:
5,000 equivalent units x $4.46 per equivalent unit 22,300
Total costs accounted for $ 340,700
All costs accounted for
Trang 14Percentage of Completion Equivalent Units Physical with Respect to Direct
Units Conversion Material Conversion Work in process, March 1 20,000 10%
Units started during March 30,000
Total units to account for 50,000
Units completed and transferred 40,000 100% 40,000 40,000
Work in process, March 31 10,000 50% 10,000 5,000
Total units accounted for 50,000
Total equivalent units 50,000 45,000
Direct Material Conversion Total Work in Process, March 1 $ 50,000 $ 7,200 $ 57,200
Costs incurred during March 90,000 193,500 283,500
Total costs to account for $ 140,000 $ 200,700 $ 340,700
Equivalent units 50,000 45,000
Cost per equivalent unit $ 2.80 $ 4.46 $ 7.26
Cost of goods completed and transferred during March
40,000 units x $7.26 per equivalent unit $ 290,400
Costs remaining in work-in-process on March 31
Direct Material:
10,000 equivalent units x $2.80 per equivalent unit $ 28,000
Conversion:
5,000 equivalent units x $4.46 per equivalent unit 22,300
MVP SPORTS EQUIPMENT COMPANY Production Report: Cutting Department
Trang 15Departmental Production Report
Analysis of
physical flow
of units.
Calculation
of equivalent
units.
Computation
of unit costs.
Analysis of total costs.
Trang 16Operation Costing
Operation costing employs some aspects
of both job-order and process costing.
Job-order Operation Costing Process Operation Costing
Costing (Products produced in batches) Costing (Products produced in batches)
Trang 17Operation Costing
Operation costing employs some aspects
of both job-order and process costing.
Job-order Operation Costing Process Costing (Products produced in batches) Costing (Products produced in batches)
Conversion costs are assigned to batches
as in process costing.
Material costs are charged
to batches as in job-order costing.