1 Click to edit Master title style 1 1 1 Process Cost Systems 3.

Slides:



Advertisements
Similar presentations
Basics of Job-Order Costing
Advertisements

Copyright © 2008 Prentice Hall All rights reserved 4-1 Process Costing Chapter 4.
John Wiley & Sons, Inc. Prepared by Karleen Nordquist.. The College of St. Benedict... and St. John’s University.... Managerial Accounting Weygandt, Kieso,
Chapter 2 Job Order Cost Systems.
Process Cost Systems Student Version.
3 Process Cost Systems.
Click to edit Master title style 1 Job Order Cost Systems 17.
Systems Design: Process Costing 2/23/04
Systems Design: Process Costing Chapter 4. © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Job-order Costing Process Costing F Many units of.
Copyright © 2006, The McGraw-Hill Companies, Inc.McGraw-Hill/Irwin 11 th Edition Chapter 4.
Systems Design: Process Costing
Copyright © 2006, The McGraw-Hill Companies, Inc.McGraw-Hill/Irwin 11 th Edition Chapter 4.
Systems Design: Process Costing Chapter 4. © The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Types of Costing Systems Used to Determine Product.
Is the accounting for process costing significantly different from job order costing? 1.Yes 2.No.
Copyright © 2006, The McGraw-Hill Companies, Inc.McGraw-Hill/Irwin Process Costing.
18 Process Cost Systems Financial and Managerial Accounting 13e
19 Job Order Costing Accounting 26e C H A P T E R Warren Reeve Duchac
Process Cost Systems COACHING CLASSES FOR PROFESSIONAL STUDENTS COACHING CLASSES FOR PROFESSIONAL STUDENTS.
3 - 1 WhoWho Uses Process Systems? Job Order Cost/ Process Cost Systems Flow of Costs in Process Systems Assigning Assigning Manufacturing Costs in Process.
Principles of Cost Accounting, 16th Edition, Edward J
Process Cost Accounting
Accounting, Fouth Edition
28-1. Process Cost Accounting Section 1: Process Cost Accounting System Chapter 28 Section Objectives 1.Compute equivalent units of production with no.
Process Costing Chapter 3 Learning Objectives
Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 8 Process-Costing Systems.
17-1 Similarities and Differences Between Job Order Cost and Process Cost Systems Job Order Cost  Costs assigned to each job.  Products have unique characteristics.
CHAPTER21 Process Costing.
19-1 P ROCESS C OST S YSTEMS CHAPTER F Used for production of small, identical, low-cost items. F Mass produced in automated continuous production.
McGraw-Hill/Irwin 4-1 Process Costing and Hybrid Product- Costing Systems 4 Chapter Four.
Chapter 4 Systems Design: Process Costing. © The McGraw-Hill Companies, Inc., 2005 McGraw-Hill /Irwin Types of Costing Systems Used to Determine Product.
Process Cost Accounting. PROCESS COST ACCOUNTING After studying this chapter, you should be able to: 1 1 Understand who uses process cost systems. 2 2.
Is it a complex process for Washburn Guitars to accumulate the cost of each Maya Series guitar? 1.Yes 2.No.
PROCESS COSTING Sakhr Bany Khaled Al-albayt University - Accounting Department 1.
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Click to edit Master title style Click to edit Master text styles –Second level Third level –Fourth level »Fifth level 10/19/ Cost Management.
1 CHAPTER 16 PRODUCT COSTING SYSTEMS IN MANUFACTURING OPERATIONS.
McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.
1 Click to edit Master title style Process Cost Systems 18.
Student Version o Repetition is an important component, a key part of learning. In memory, the more times patterns of thought are repeated, the more likely.
Chapter Chapter 21-2 CHAPTER 21 PROCESS COST ACCOUNTING Accounting Principles, Eighth Edition.
4-1 Chapter Four Systems Design: Process Costing.
Chapter 18 Process Costing
Chapter 19 Process Cost Systems Accounting, 21st Edition
Click to edit Master title style Click to edit Master text styles –Second level Third level –Fourth level »Fifth level 1 2 Job Order Costing Student.
Prepared by: C. Douglas Cloud Professor Emeritus of Accounting Pepperdine University © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned,
C2 - 1 Learning Objectives Power Notes 1.Comparing Job Order Costing and Process Costing 2.Physical Flows and Cost Flows for a Process Manufacturer 3.The.
Student Version © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted.
Process Cost Systems LO 2a – Preparation of a Cost of Production Report: FIFO.
Process Cost System Seminar 4 AC Describe process cost systems.
© The McGraw-Hill Companies, Inc., 2007 McGraw-Hill /Irwin Systems Design: Process Costing Chapter 4.
C Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part.
17-1 Similarities and Differences Between Job Order Cost and Process Cost Systems Job Order Cost  Costs assigned to each job.  Products have unique characteristics.
Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 8 Process-Costing Systems.
Chapter 18 Process Costing. Describe the flow of costs through a process costing system 18-2.
Copyright © 2015 McGraw-Hill Education. All rights reserved
Chapter 11 Process Costing. Chapter 11 Process Costing.
Job-Order Costing: Cost Flows and External Reporting
Process Costing and Hybrid Product- Costing Systems
Process Costing CHAPTER 4.
Principles of Managerial Accounting
Process Cost Accounting
Cost Accounting ELS.
18 Process Cost Systems Financial and Managerial Accounting 13e
Managerial Accounting Second Edition Weygandt / Kieso / Kimmel
Power Notes Chapter 18 Process Cost Systems Learning Objectives C18
Chapter 17 Job Order Costing Student Version
Process Cost Systems LO 4 – Using the Cost of Production Report for Decision Making.
2 Job Order Costing Managerial Accounting 13e C H A P T E R Warren
Presentation transcript:

1 Click to edit Master title style Process Cost Systems 3

2 Click to edit Master title style Both systems: Comparing Job Order and Process Cost Systems 1.Accumulate product costs. 2.Categorize manufacturing costs into direct material, direct labor, and factory overhead. 3.Allocate costs to products. (Continued) 3-1

3 Click to edit Master title style Both systems: 4.Maintain perpetual materials, work in process, and finished goods inventory records. 5.Use product cost data for decision making. 3-1

4 Click to edit Master title style Primary differences: 1.Manufacturing costs are accumulated to departments, rather than jobs. 2.Manufacturing costs are allocated to products based on units of production. 3.Manufacturing costs are accumulated and transferred between departments. (Continued) 3-1

5 Click to edit Master title style Primary differences: 4.Work in process inventory consists of partially completed production within a department, rather than the sum of job cost sheets of partially completed jobs. 3-1 (Concluded)

6 Click to edit Master title style Process cost systems are used to manufacture homogeneous products. Examples are:  Tennis balls  Motor oil  Candy bars  Soft drinks 3-1

7 Click to edit Master title style In contrast, job cost systems are used to manufacture unique products or provide unique services. Examples are:  Custom-built homes  Landscape design services  Customer cabinets  Airplanes (767) 3-1

8 Click to edit Master title style Inventory in process, July 1, 5,000 gallons Direct materials cost, 5,000 gallons$ 5,000 Conversion costs, 5,000 gallons, 70% completed 1,225 Total inventory in process, July 1$ 6,225 Direct materials cost for July, 60,000 gallons$66,000 Direct labor for July10,500 Factory overhead applied for July 7,275 83,775 Total production costs to account for$90,000 Goods transferred to Packaging in July (including units in process on July 1), 62,000 gallons? Inventory in process, July 31, 3,000 gallons, 25% complete as to conversion costs? 3-2 Mixing Department of Frozen Delight 26

9 Click to edit Master title style Step 1:Determine the Units to Be Assigned Costs Total gallons charged to production: In process July 15,000 gallons Received from materials storage60,000 gallons Total units accounted for by the Mixing Department65,000 gallons 3-2

10 Click to edit Master title style 10 Total Units to Be Assigned Costs A.Inventory in process, July 1, completed in July5,000 gal. B.Started and completed in July57,000 gal. Transferred out to the Packaging Department in July62,000 gal. C.Inventory in process, July 31 3,000 gal. Total gallons to be assigned costs65,000 gal. 3-2

11 Click to edit Master title style 11 Step 2:Calculate Equivalent Units of Production 3-2 Whole units are the number of units in production during a period, whether completed or not. Equivalent units of production are the number of units that were completed with respect to either materials or conversion costs within a given accounting period.

12 Click to edit Master title style Frozen Delight’s Equivalent Units Computation for Materials in July PercentEquivalent TotalMaterialsUnits for WholeAddedDirect Unitsin JulyMaterials Inventory in process, July 15,0000%0 Started and completed in July (62,000 – 5,000) 57,000100% 57,000 Transferred out to Packaging Dept.62,000—57,000 Inventory in process, July 31 3,000100% 3,000 Total gallons to be assigned cost65,00060,000 Important: Note the word “Added” 3-2

13 Click to edit Master title style 13 Conversion Equivalent Units The direct labor and applied factory overhead are often combined as conversion costs because they are both usually incurred evenly throughout a process. 3-2

14 Click to edit Master title style Percent TotalConversionEquivalent WholeCompletedUnits for Unitsin JulyConversion Inventory in process, July 1 (70% complete)5,00030%1,500 Started and completed in July (62,000 – 5,000) 57,000100% 57,000 Transferred out to Packaging Dept.62,000—58,500 Inventory in process, July 31 (25% complete) 3,00025% 750 Total gallons to be assigned cost65,00059,

15 Click to edit Master title style Step 3:Determine the Cost per Equivalent Unit Inventory in process, July 101,500 Started and completed in July (62,000 – 5,000) 57,00054,000 Transferred out of Packaging Dept. In July57,00058,500 Inventory in process, July 31 3, Total gallons to be assigned costs60,00059,250 Direct MaterialsConversion Equivalent Units from Step 2 3-2

16 Click to edit Master title style Conversion Equivalent Unit Cost Conversion Equivalent Unit Cost Direct Materials Equivalent Unit Cost Direct Materials Equivalent Unit Cost $0.30 per equivalent unit of con- version = $17,775 conversion cost 59,250 conversion equivalent units $66,000 direct materials cost 60,000 direct materials equivalent units $1.10 per equivalent unit of direct materials = 3-2

17 Click to edit Master title style Inventory in process, July 1, balance $6,225 Equivalent units for completing the July 1 in-process inventory01,500 Equivalent unit costx $1.10x $0.30 Cost of completed July 1 in- process inventory0$ Cost of July 1 in-process inventory transferred to Packaging Department$6,675 Direct Conver- MaterialssionTotal CostsCostsCosts Step 4:Allocate Costs to Transferred and Partially Completed Units 3-2

18 Click to edit Master title style Units started and completed in July57,00057,000 Equivalent unit costx $1.10x $0.30 Cost to complete the units started and completed in July$62,700$17,100$79,800 Direct MaterialsConversionTotal CostsCostsCosts Costs Associated With the Units Started and Completed 3-2

19 Click to edit Master title style Equivalent units in ending inventory3, Equivalent unit costx $1.10x $0.30 Cost to ending inventory$ 3,300$ 225$3,525 Direct MaterialsConversionTotal CostsCostsCosts Costs Associated With the Partially Completed Units in the Ending Inventory 3-2

20 Click to edit Master title style 20 Cost of Production Report A cost of production report is normally prepared for each processing department at periodic intervals. 3-2

21 Click to edit Master title style 21 The cost of production report provides the following production quantity and cost data:  The units for which the department is accountable and the disposition of those units.  The production costs incurred by the department and the allocation of those costs between completed and partially completed units. 3-2

22 Click to edit Master title style Frozen Delight Cost per Equivalent Unit Direct material cost per equivalent unit (June): $5,000 5,000 equivalent units of materials $1.00 per equivalent unit = Conversion cost per equivalent unit (June): $1,225 (5,000 x 70%) equivalent units of conversion cost $0.35 per equivalent unit = 3-2

23 Click to edit Master title style 23 Journal Entries for Frozen Delight a.Materials, including milk, cream, sugar, packaging, and indirect materials, were purchased on account, $88,000. Materials88,000 Accounts Payable88,

24 Click to edit Master title style 24 b.Milk, cream, and sugar were requisitioned by the Mixing Department, $66,000. Another $8,000 of packaging materials was requisitioned by the Packaging Department. Indirect materials for the Mixing and Packaging Department were $4,125 and $3,350, respectively. 3-3

25 Click to edit Master title style 25 b.Work in Process—Mixing 66,000 Work in Process—Packaging8,000 Factory Overhead—Mixing4,125 Factory Overhead—Packaging3,000 Materials81,

26 Click to edit Master title style 26 c.Direct labor in the Mixing and Packaging departments was $10,500 and $12,000, respectively. Work in Process—Mixing10,500 Work in Process—Packaging12,000 Wages Payable22,

27 Click to edit Master title style 27 d.Equipment depreciation for the Mixing and Packaging departments was $3,350 and $1,000, respectively. Factory Overhead—Mixing3,350 Factory Overhead—Packaging1,000 Accumulated Depreciation— Equipment4,

28 Click to edit Master title style 28 e.The factory overhead applied to Mixing and Packaging was $7,275 and $3,500, respectively. Work in Process—Mixing7,275 Work in Process—Packaging3,500 Factory Overhead— Mixing7,275 Factory Overhead— Packaging3,

29 Click to edit Master title style 29 f.The amount of costs transferred from the Mixing Department to the Packaging Department was $86,750 per the cost of production report in Exhibit 7. Work in Process—Packaging86,475 Work in Process—Mixing86,

30 Click to edit Master title style 30 g. The goods transferred out of the Packaging Department to Finished Goods according to the Packaging Department cost of production report was $106,000. Finished Goods—Ice Cream106,000 Work in Process— Packaging106,

31 Click to edit Master title style 31 h. The cost of goods sold out of the finished goods inventory was $107,000. Cost of Goods Sold107,000 Finished Goods—Ice Cream107,

32 Click to edit Master title style Ending Inventories for Frozen Delight July 31 Materials$ 6,875 Work in Process—Mixing Dept.3,525 Work in Process—Packaging Department7,725 Finished Goods 4,000 Total inventories$22,

33 Click to edit Master title style Cost of Production Reports Holland Beverage Company—Blending Department For the Months Ended April 30 and May 31, 2008 AprilMay Direct materials$ 20,000$ 40,600 Direct labor15,00029,400 Energy8,00020,000 Repairs4,0008,000 Tank cleaning 3,000 8,000 Total$ 50,000$ 106,000 Units completed/ 100,000/ 200,000 Cost per unit$ 0.50$

34 Click to edit Master title style Per-Unit Expense Comparisons 3-4

35 Click to edit Master title style 35 In addition to unit production cost trends, managers of process manufacturers are also concerned about yield trends. Yield is the ratio of materials output quantity to the input quantity. 3-4

36 Click to edit Master title style 36  JIT is a business philosophy that focuses on reducing time and cost and eliminating poor quality.  JIT organizes manufacturing cells that perform several manufacturing steps.  Workers are cross-trained to perform more than one task. This provides flexibility and worker pride and involvement in the final product.  Because products have limited movement between departments, the nonvalue-added cost of transporting products and parts is reduced. Just-in-Time Processing 3-5