The Islamic University –Gaza

Slides:



Advertisements
Similar presentations
© 2009 Pearson Prentice Hall. All rights reserved. Process Costing.
Advertisements

Systems Design: Process Costing. Similarities Between Job-Order and Process Costing  Both systems assign material, labor and overhead costs to products.
Systems Design: Process Costing 2/23/04
Process Costing Chapter 17.
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.
Process Costing Dr. Baldwin University of Arkansas – Fort Smith Fall 2010.
Contrôle Interne Avancé-HEC Lausanne-2007/2008 CHAPTER 17 Process Costing.
Systems Design: Process Costing Chapter 4. © The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Types of Costing Systems Used to Determine Product.
Chapter 4 Process Costing. Similarities Between Job-Order and Process Costing Both systems assign material, labor and overhead costs to products and they.
CHAPTER 17 Process Costing To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright © 2006 by Pearson Education. All rights reserved.
Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall
CHAPTER 17 Process Costing.
Copyright © 2006, The McGraw-Hill Companies, Inc.McGraw-Hill/Irwin Process Costing.
Process-Costing Systems
Process Cost Accounting
© 2012 Pearson Prentice Hall. All rights reserved. Process Costing.
PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPA Copyright.
PowerPoint Authors: Jon A. Booker, Ph.D., CPA, CIA Charles W. Caldwell, D.B.A., CMA Susan Coomer Galbreath, Ph.D., CPA Copyright © 2010 by The McGraw-Hill.
21 - 1©2002 Prentice Hall, Inc. Business Publishing Accounting, 5/E Horngren/Harrison/Bamber Process Cost Chapter 21.
Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 8 Process-Costing Systems.
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.
Process Costing Objectives — Compare job order and process costing — Talk about costs to account for — Understand the concept of equivalent units.
McGraw-Hill/Irwin 4-1 Process Costing and Hybrid Product- Costing Systems 4 Chapter Four.
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.
Process Costing Dr. Hisham Madi. Process Costing  Process-costing systems are used when companies produce a large quantity of identical or very similar.
The Islamic University –Gaza
Copyright © 2008, The McGraw-Hill Companies, Inc.McGraw-Hill/Irwin Chapter Four Systems Design: Process Costing.
Prepared by Diane Tanner University of North Florida Chapter 17 1 Process Costing.
Copyright © 2008, The McGraw-Hill Companies, Inc.McGraw-Hill/Irwin Chapter Four Systems Design: Process Costing.
PROCESS COSTING Sakhr Bany Khaled Al-albayt University - Accounting Department 1.
Process Costing Chapter 4 9/16/2013 Chapter 4: Process Costing
Process Costing Objectives — Compare job order and process costing — Talk about costs to account for — Understand the concept of equivalent units.
IES 342 Industrial Cost Analysis & Control | Dr. Karndee Prichanont, SIIT 1 Process Costing Chapter 11 Objectives: Explain the basic ideas underlying process.
4-1 Chapter Four Systems Design: Process Costing.
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., Process Cost Accounting Chapter 20.
Chapter 18 Process Costing
Process Costing Dr. Hisham Madi. Case 3: Process Costing with Some Beginning and Some Ending Work-in-Process Inventory.
Process Costing Lecture 13 1 Readings Chapter 17,Cost Accounting, Managerial Emphasis, 14 th edition by Horengren Chapter 4, Managerial Accounting 12 th.
PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPA Copyright.
PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPA Copyright.
Management Accounting BA213 Michael Dimond. Michael Dimond School of Business Administration Costing Methods Process Costing Job Costing Activity-based.
The Islamic University –Gaza
1 Copyright © 2008 Cengage Learning South-Western. Heitger/Mowen/Hansen Process Costing Chapter Five Fundamental Cornerstones of Managerial Accounting.

PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPA Copyright.
© The McGraw-Hill Companies, Inc., 2007 McGraw-Hill /Irwin Systems Design: Process Costing Chapter 4.
Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 8 Process-Costing Systems.
© The McGraw-Hill Companies, Inc., 2002 McGraw-Hill/Irwin Slide Process Costing.
Prepared by Diane Tanner University of North Florida ACG Process Costing 3-4.
Chapter 18 Process Costing. Describe the flow of costs through a process costing system 18-2.
Chapter 11 Process Costing. Chapter 11 Process Costing.
Chapter 17 Process Costing.
Process Costing and Hybrid Product-Costing Systems
Process Costing Systems
Financial and Managerial Accounting
Job-Costing and Process-Costing Systems
Process Costing and Hybrid Product- Costing Systems
CHAPTER 17 Process Costing.
Process Costing CHAPTER 4.
Process Costing Lecture 4. Process Costing Lecture 4.
CHAPTER 17 Process Costing Edited by Dr. Charles Bailey for ACCT7310.
Process Cost Accounting
Systems Design: Process Costing
CHAPTER 17 Process Costing.
Chapter 18 Process Costing
November 13-16, 2015 Process Costing
CHAPTER 17 Process Costing.
CHAPTER 17 Process Costing Spoilage, Rework, and Scrap.
Chapter 17.
Presentation transcript:

The Islamic University –Gaza Process Costing Dr. Hisham Madi

Process Costing Process-costing systems are used when companies produce a large quantity of identical or very similar goods or services

Job versus Process Costing Job-Costing Systems Distinct, identifiable units of a product or service Examples: Custom-made machines, houses Process-Costing Systems Masses of identical or similar units of a product or service Examples: Food, chemical processing Here we have a comparison of job-costing and process-costing systems. Job costing systems are used for distinct, identifiable units of a product or service while process costing is used for masses of identical or similar units of a product or service. From page 665

Process Costing Process costing is a system where the unit cost of a product or service is obtained by assigning total costs to many identical or similar units of output. Unit costs are computed by dividing total costs incurred by the number of units of output from the production process. Each unit receives the same or similar amounts of direct materials costs, direct labor costs, and manufacturing overhead.

job-vs-process-costing In a job-costing system, individual jobs use different quantities of resources, so it would be incorrect to cost each job at the same average production cost. In contrast, when identical or similar units of products or services are mass-produced, process costing is used to calculate an average production cost for all units produced.

Process-Costing cost categories

Process-Costing cost categories Process-costing systems separate costs into cost categories according to when costs are introduced into the process. Direct materials are usually added at the beginning of the production process, or at the start of work in a subsequent department down the assembly line Conversion costs are generally added equally along the production process.

Process-costing: three cases Let’s look at the process-costing process three ways: No beginning or ending work-in-process inventories. No beginning work-in-process inventory and some ending work-in-process inventory. Both beginning and ending work-in-process inventories are present.

Process costing – case 1 When using process costing without any beginning or ending work-in-process inventory, all costs that were introduced to the process during the period will be assigned to the finished units leaving work-in-process inventory at the end of the period.

Process costing – case 1 On January 1, 2012, there was no beginning inventory of SG-40 units in the assembly department. During the month of January, Pacific Electronics started, completely assembled, and transferred out to the testing department 400 units

Process costing – case 1 Data for the assembly department for January 2012 are as follows:

Process costing – case 1 Pacific Electronics records direct material costs and conversion costs in the assembly department as these costs are incurred. By averaging, assembly cost of SG-40 is $56,000 400 units $140 per unit, itemized as follows:

Process costing – case 1 Case 1 shows that in a process-costing system, average unit costs are calculated by dividing total costs in a given accounting period by total units produced in that period. Because each unit is identical, we assume all units receive the same amount of direct material costs and conversion costs. Case 1 applies whenever a company produces a homogeneous product or service but has no incomplete units when each accounting period ends

Case 2: Process Costing with Zero Beginning and Some Ending Work-in-Process Inventory In February 2012, Pacific Electronics places another 400 units of SG-40 into production. Because all units placed into production in January were completely assembled, there is no beginning inventory of partially completed units in the assembly department on February 1 Some customers order late, so not all units started in February are completed by the end of the month. Only 175 units are completed and transferred to the testing department.

Case 2: Process Costing with Zero Beginning and Some Ending Work-in-Process Inventory Data for the assembly department for February 2012 are as follows:

Case 2: Process Costing with Zero Beginning and Some Ending Work-in-Process Inventory The 225 partially assembled units as of February 29, 2012, are fully processed with respect to direct materials, because all direct materials in the assembly department are added at the beginning of the assembly process. Conversion costs, however, are added evenly during assembly. The point to understand here is that a partially assembled unit is not the same as a fully assembled unit

Case 2: Process Costing with Zero Beginning and Some Ending Work-in-Process Inventory Five steps required to calculate (1) the cost of fully assembled units in February 2012 and (2) the cost of partially assembled units still in process at the end of that month, for Pacific Electronics.

Case 2: Process Costing with Zero Beginning and Some Ending Work-in-Process Inventory Summarize the flow of physical units of output. Compute output in terms of equivalent units. Summarize total costs to account for. Compute cost per equivalent unit. Assign total costs to units completed and to units in ending work-in-process.

Physical Units and Equivalent Units (Steps 1 and 2) Step 1tracks physical units of output. physical units are the number of output units, whether complete or incomplete.

Physical Units and Equivalent Units (Steps 1 and 2) A derived amount of output units that: Takes the quantity of each input in units completed and in unfinished units of work in process and Converts the quantity of input into the amount of completed output units that could be produced with that quantity of input.

Physical Units and Equivalent Units (Steps 1 and 2) Note that equivalent units are calculated separately for each input (such as direct materials and conversion costs). Moreover, every completed unit, by definition, is composed of one equivalent unit of each input required to make it. When calculating equivalent units in step 2, focus on quantities and disregard dollar amounts until after the equivalent units are computed.

Calculation of Product Costs (Steps 3, 4, and 5) Step 3: Summarizes total costs to account for. Step 4: calculates cost per equivalent unit separately for direct materials and for conversion costs Step5 assigns these costs to units completed and transferred out and to units still in process at the end of February 2012. The idea is to attach dollar amounts to the equivalent output units for direct materials and conversion costs of (a) units completed and (b) ending work in process,

Calculation of Product Costs (Steps 3, 4, and 5) costs assigned to the 225 physical units in ending work-in-process inventory are as follows:

Calculation of Product Costs (Steps 3, 4, and 5)

Journal Entries In process costing, there is one Work in Process account for each process. There are accounts for Work in Process—Assembly and Work in Process—Testing. Pacific Electronics purchases direct materials as needed. These materials are delivered directly to the assembly department

Journal Entries

Journal Entries