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 you will be able to recall information. o These PowerPoint slides have been modified from the lecture decks by making them fill-in-the-blank. Why? So that you get an opportunity to repeat a visual cue (from the lecture or the book) via completing text here. o In addition, most text book exhibits have been removed as they are available in your text directly.

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. Process Cost Systems Chapter 20

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. Learning Objective Describe process cost systems. 1

________ ______ System o A process ______ produces products that are ______ from each other using a ______ production process. o The cost accounting system used by process manufacturers is called the ______ cost system.

Comparing Job Order and Process Cost o Process and job order cost systems are similar in that each system:  _______________________________________________. (continued)

Comparing Job Order and Process Cost  Uses ______ inventory system for materials, work in process, and finished goods.  Provides useful product cost information for ______ ______.

Comparing Job Order and Process Cost o ______ ______ systems are used to manufacture homogeneous products. Examples are:  _____________

Comparing Job Order and Process Cost o In contrast, job cost systems are used to manufacture ______ products or provide ______ services. Examples are:  _____________

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. Learning Objective Prepare a cost of production report. 2

Cost of ______ Report o The cost of ______ ______ summarizes the production and cost data for a department as follows:  ___________________________________________ ___________________________________________ ___________________________________________

C OST OF P RODUCTION R EPORT Mixing Department of Frozen Delight Preparing a cost of production report will provide these missing amounts.

Determine the Units to be Assigned Costs o To determine the units to be assigned costs, first know that a ______ can be any measure of ______ production, such as tons, gallons, pounds, barrels, or cases.

Determine the Units to be Assigned Costs

Compute Equivalent Units of Production o ______ units are the number of units in production during a ______, whether completed or not. o ______ units of production are the portion of ______ units that are complete with respect to either materials or conversion (______ ______ and ______ ______ ) costs.

Compute Equivalent Units of Production A 1,000-gallon batch (vat) of ice cream is only 40% complete in the mixing process on May 31. Thus, the batch is only 40% complete as to conversion costs. Conversion Costs

Direct Materials Compute Equivalent Units of Production Frozen Delight adds all the materials at the beginning of the mixing process.

Conversion Equivalent Units o To compute equivalent units for conversion costs, it is necessary to know how ______ ______ and ______ ______ enter the manufacturing process. o It is assumed that Frozen Delight incurs conversion costs evenly throughout its manufacturing process.

C ONVERSION E QUIVALENT U NITS

Determine the Cost per Equivalent Unit Direct Materials Cost per Equivalent Unit = Conversion Cost per Equivalent Unit =

D ETERMINE THE C OST PER E QUIVALENT U NIT

Allocating Costs to Units o Product costs must be ______ to the units transferred ______ and the ______ completed units on hand at the ______ of the period.

Allocating Costs to Units o The total production costs to be assigned for Frozen Delight in July are $90,000.

Allocating Costs to Units o The units to be assigned these costs are shown below. The costs to be assigned these units are indicated by question marks.

Allocating Costs to Units o The 5,000 gallons of inventory in Group 1 were completed and transferred out to the Packaging Department in July. The cost is determined as follows:

Allocating Costs to Units o The 57,000 units started and completed in July (Group 2) incurred all of their direct materials and conversion costs in July. The cost assigned to these 57,000 units is shown below.

Group 1 Cost of July 1 in-process inventory$ 6,675 Group 2 Cost of the units started and completed in July 79,800 Total costs transferred to Packaging Department in July$86,475 Allocating Costs to Units o The total cost transferred to the Packaging Department in July of $86,475 is the sum of the beginning inventory cost and the costs of the units started and completed in July.

Allocating Costs to Units o The 3,000 gallons in process on July 31 (Group 3) incurred all of their direct materials costs and 25% of their conversion costs in July for a total cost of $3,525.

Allocating Costs to Units o The total manufacturing costs for Frozen Delight in July were assigned as shown below. Note that amounts now appear where question marks appeared earlier.

Preparing the Cost of Production Report o A cost of production report is prepared for ______ processing ______ at periodic ______. The report summarizes the following production quantity and cost data:  ___________________________________________ ___________________________________________ ___________________________________________.

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. Learning Objective Journalize entries for transactions using a process cost system. 3

F ROZEN D ELIGHT ’ S C OST F LOWS

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. Learning Objective Describe and illustrate the use of cost of production reports for decision making. 4

Using the Cost of Production Report o The cost of production report for the Mixing Department (Exhibit 7) shows that the 5,000 units in the beginning inventory cost $6,225. This inventory cost of $6,225 consists of the following costs:

Direct Materials Cost per Equivalent Unit = $ gallons = $.00 per gallon Direct Materials Cost per Equivalent Unit = (continued) Using the Cost of Production Report o June costs per equivalent unit of materials and conversion costs can be determined as follows:

Conversion Cost per Equivalent Unit = $. per gallon = $ ( x %) gallons = Conversion Cost per Equivalent Unit Using the Cost of Production Report

Yield o In addition to unit costs, managers of process manufacturers are also concerned about ______ ______. The ______ is computed as follows: _____ =

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. Learning Objective Compare just-in-time processing with traditional manufacturing processing. 5

______- ___ - ______ (JIT) Processing o _____-___-_____ (JIT) processing is a management ______ that focuses on ______ time and cost and eliminating ______ ______.

______- ___ - ______ (JIT) Processing o In a _____-___-_____ system, processing functions are combined into ______ ______ that perform several manufacturing steps. o Workers are cross-trained to perform more than ______ function. This provides ______ and ______ worker pride and ______ in the final product.

Just-In-Time (JIT) Processing o The primary objective of JIT systems is to increase the efficiency of operations by:  _________________________________

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. Appendix Average Cost Method

S&W Ice Cream Company S&W Ice Cream Company mixes direct materials in refrigerated vats and has two manufacturing departments, Mixing and Packaging.

S&W Ice Cream Company o The manufacturing data for the Mixing Department for July 2014 are as follows:

S&W Ice Cream Company

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. Process Cost Systems The End