Download presentation
Presentation is loading. Please wait.
Published byAntony Hicks Modified over 9 years ago
2
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 © 2014 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Chapter 3 Process Costing
3
3- 3 Describe the key features of a process costing system. Learning Objective 3-1
4
3- 4 Basic Concepts in Process Costing Process costing is used by companies that produce homogeneous products or services using a series of standardized processes. Canned and bottled goods, frozen foods, paper products, and petroleum products are examples of homogeneous products that result from a standardized process. Although process costing is most often identified with manufacturing companies, it can also be used by service firms that perform routine processes, such as an insurance company that has a claims and reimbursement process or a financial institution that processes home refinance loans.
5
3- 5 Flow of Costs in Process Costing
6
3- 6 Process Costing Production Report The foundation of a process costing system is the production report. In the report we provide information about: 1.The number of units produced. 2.The manufacturing costs transferred into Work in Process Inventory. 3.The manufacturing costs transferred out of Work in Process Inventory to Finished Goods Inventory. 4.The number of units remaining in process at the end of the period. 5.The cost of units remaining in process at the end of the period. The foundation of a process costing system is the production report. In the report we provide information about: 1.The number of units produced. 2.The manufacturing costs transferred into Work in Process Inventory. 3.The manufacturing costs transferred out of Work in Process Inventory to Finished Goods Inventory. 4.The number of units remaining in process at the end of the period. 5.The cost of units remaining in process at the end of the period.
7
3- 7 Reconcile the number of physical units using the weighted-average method. Learning Objective 3-2
8
3- 8 Step 5: Prepare a Production Report. Preparing the Production Report (Weighted-Average Method) Step 4: Reconcile the total cost of work in process. Step 3: Calculate the cost per equivalent unit. Step 2: Translate the physical units into equivalent units. Step 1: Reconcile the number of physical units worked on during the period.
9
3- 9 Prepare the Production Report (Weighted-Average Method) Step 1: Reconcile the number of physical units. (Unit = 1 Barrel of Wine)
10
3- 10 Prepare the Production Report (Weighted-Average Method) Step 1: Reconcile the number of physical units. (Unit = 1 Barrel of Wine)
11
3- 11 Process Costing Production Report Step 2: Convert Physical Units Into Equivalent Units The next step in preparing the production report is to calculate the number of equivalent units. An equivalent unit is a measure used to convert partially completed units into the equivalent of a full unit. Consider the information below.
12
3- 12 Additional Factors in Processing Costing 1.We have not discussed process costing when the FIFO method is applied. This material in covered in Supplement 3A to this chapter. The only difference between the two methods is how we treat beginning inventory. 2.We have not considered how to account for subsequent departments in process costing. We did not look at extending our example to cover the Bottling Department.
13
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 © 2014 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Supplement 3A FIFO Method
14
3- 14 Step 1: Reconcile the Number of Physical Units FIFO assumes that the units in beginning inventory were completed first. So, not all units that were completed during the current period were started in the current period.
15
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 © 2014 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Supplement 3B Journal Entries for Process Costing
16
3- 16 Prepare journal entries to record the flow of manufacturing costs in a process cost system. Learning Objective 3-S2
17
3- 17 Weighted-Average Vs. FIFO Process Costing
18
3- 18 End of Chapter 3
Similar presentations
© 2024 SlidePlayer.com. Inc.
All rights reserved.