Managerial Accounting Chapter 4

Job-order Costing vs. Process Costing Similarities Same basic purpose exists Use same basic manufacturing accounts Flow of costs are basically the same Differences The flow of goods in the process costing situation are essentially indistinguishable and continuous through the manufacturing process. Costs are accumulated by department, rather than by individual job. Use a department production report rather than a job-cost sheet.

Process costing methods Only 2 are covered in text Weighted average FIFO

Equivalent Units of Product Equivalent units in the ending work in process inventory = Number of partially completed units x % complete Weighted Average method Equivalent units of product = Units transferred to next department or to finished goods + Equivalent units in the ending work in process inventory

Production Report Purpose – summarize all of the activity that takes place in a department’s work in process. Consists of three parts: Quantity schedule and computation of equivalent units Computation of costs per equivalent unit Reconciliation of all cost flows into and out of the department