3 - 1

Who Uses Process Systems?

Job Order Cost/ Process Cost Systems

Flow of Costs in Process Systems

Assigning Manufacturing Costs in Process

Equivalent Units

Production Cost Report

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Managerial AccountingSecond EditionWeygandt / Kieso / Kimmel

ELS

3 - 2

Who Uses Process Systems?

Job Order Cost/ Process Cost Systems

Flow of Costs in Process Systems

Assigning Manufacturing Costs in Process

Equivalent Units

Production Cost Report

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Process Cost Accounting

3 - 3

Who Uses Process Systems?

Job Order Cost/ Process Cost Systems

Flow of Costs in Process Systems

Assigning Manufacturing Costs in Process

Equivalent Units

Production Cost Report

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EndEndShowShow

Job Order Cost SystemCost are assigned to each job; used where finished products can be individually identified

3 - 4

Who Uses Process Systems?

Job Order Cost/ Process Cost Systems

Flow of Costs in Process Systems

Assigning Manufacturing Costs in Process

Equivalent Units

Production Cost Report

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Process Cost SystemsAn accounting system used to

apply costs:To similar products That are mass-produced In a continuous fashion

Illustration 3-1

Illustration 3-2

Illustration 3-2

3 - 7

Who Uses Process Systems?

Job Order Cost/ Process Cost Systems

Flow of Costs in Process Systems

Assigning Manufacturing Costs in Process

Equivalent Units

Production Cost Report

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In a process cost system, costs are tracked through a series of connected manufacturing processes or departments; used for large volume production of uniform products

Illustration 3-3

Job Order versus Process Cost SystemIllustration 3-4

Job Order versus Process Cost SystemIllustration 3-5

Accumulating Manufacturing Costs- Same As In Job Order

Date Account Titles and Explanation Debit Credit(3)

Jan. 31 Manufacturing Overhead Utilities Payable Prepaid Insurance Accounts Payable - for repairs Accumulated DepreciationProperty Taxes Payable

(To record overhead costs)

13,8004,8002,0002,6003,0001,400

Date Account Titles and Explanation Debit Credit(2)

Jan. 31 Factory Labor Factory Wages Payable

Employer Payroll Taxes Payable (To record factory labor costs)

32,00027,0005,000

Date Account Titles and Explanation Debit Credit(1)

Jan. 4 Raw Materials Inventory Accounts Payable

(Purchase of raw materials on account)

42,00042,000

From Chapter 2

3 - 12

Who Uses Process Systems?

Job Order Cost/ Process Cost Systems

Flow of Costs in Process Systems

Assigning Manufacturing Costs in Process

Equivalent Units

Production Cost Report

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Assigning Material Costs• Fewer requisition slips than in job

order since materials are for a process rather than specific job.

• Materials usually added at beginning of first process - but sometimes added at other times.

3 - 13

Who Uses Process Systems?

Job Order Cost/ Process Cost Systems

Flow of Costs in Process Systems

Assigning Manufacturing Costs in Process

Equivalent Units

Production Cost Report

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Assigning Direct LaborLabor cost per process obtained from

payroll register or departmental payroll summaries.

3 - 14

Who Uses Process Systems?

Job Order Cost/ Process Cost Systems

Flow of Costs in Process Systems

Assigning Manufacturing Costs in Process

Equivalent Units

Production Cost Report

NextSlide

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EndEndShowShow

Assigning Manufacturing Overhead

• Objective in assigning manufacturing overhead to departments is to allocate on objective and equitable basis.

Assigning Manufacturing CostsDate Account Titles and Explanation Debit Credit

Jan. 31 Work in Process -MachiningWork In Process - Assembly Raw Materials Inventory

(To record materials used)

xxxxxxxx

xxxx

Date Account Titles and Explanation Debit Credit

Jan. 31 Work in Process -Machining Work in Process-Assembling

Factory Labor

(To assign factory labor to job)

xxxxxxxx

xxxx

Date Account Titles and Explanation Debit Credit

Jan. 31 Work in Process-Assembly Work in Process -Machining

Manufacturing Overhead (To assign overhead to production)

xxxxxxxx

xxxx

3 - 16

Who Uses Process Systems?

Job Order Cost/ Process Cost Systems

Flow of Costs in Process Systems

Assigning Manufacturing Costs in Process

Equivalent Units

Production Cost Report

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EndEndShowShow

Transfer to Next DepartmentAt the end of period an entry is needed to

record the cost of goods transferred out of the department.

Transfer to Next DepartmentDate Account Titles and Explanation Debit Credit

Work in Process -AssemblyWork In Process - Machining

(To record transfer of units to Assembly Department)

xxxxxxxx

Date Account Titles and Explanation Debit Credit

Finished Goods InventoryWork In Process - Assembling

(To record transfer of units to Finished Goods)

xxxxxxxx

Date Account Titles and Explanation Debit Credit

Cost of Goods Sold Finished Goods Inventory

(To record cost of units sold )

xxxxxxxx

Transfer to Finished Goods

Transfer to Cost of Goods Sold

3 - 18

Who Uses Process Systems?

Job Order Cost/ Process Cost Systems

Flow of Costs in Process Systems

Assigning Manufacturing Costs in Process

Equivalent Units

Production Cost Report

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EndEndShowShow

Equivalent Units of Production

A measure of the work done during the period, expressed in fully completed units.

Illustration 3-7

3 - 19

Who Uses Process Systems?

Job Order Cost/ Process Cost Systems

Flow of Costs in Process Systems

Assigning Manufacturing Costs in Process

Equivalent Units

Production Cost Report

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EndEndShowShow

Weighted-average Method

Method used to compute equivalent units of production which considers the degree of completion (weighting) of the units completed and transferred out and the ending work in process.

3 - 20

Who Uses Process Systems?

Job Order Cost/ Process Cost Systems

Flow of Costs in Process Systems

Assigning Manufacturing Costs in Process

Equivalent Units

Production Cost Report

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EndEndShowShow

Conversion Costs

The sum of labor costs and overhead costs.

3 - 21

Who Uses Process Systems?

Job Order Cost/ Process Cost Systems

Flow of Costs in Process Systems

Assigning Manufacturing Costs in Process

Equivalent Units

Production Cost Report

NextSlide

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EndEndShowShow

Production Cost Report

An internal report for management that shows both production quantity and cost data for a production department.

3 - 22

Who Uses Process Systems?

Job Order Cost/ Process Cost Systems

Flow of Costs in Process Systems

Assigning Manufacturing Costs in Process

Equivalent Units

Production Cost Report

NextSlide

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EndEndShowShow

Production Cost ReportIllustration 3-12

3 - 23

Who Uses Process Systems?

Job Order Cost/ Process Cost Systems

Flow of Costs in Process Systems

Assigning Manufacturing Costs in Process

Equivalent Units

Production Cost Report

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EndEndShowShow

Physical Units

Actual units to be accounted for during a period, irrespective of any work performed.

3 - 24

Who Uses Process Systems?

Job Order Cost/ Process Cost Systems

Flow of Costs in Process Systems

Assigning Manufacturing Costs in Process

Equivalent Units

Production Cost Report

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EndEndShowShow

Total Units (Costs) to Be Accounted for

The sum of the units (costs) started (or transferred) into production during the period plus the units (costs) in process at the beginning of the period.

3 - 25

Who Uses Process Systems?

Job Order Cost/ Process Cost Systems

Flow of Costs in Process Systems

Assigning Manufacturing Costs in Process

Equivalent Units

Production Cost Report

NextSlide

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EndEndShowShow

Total Units (costs) Accounted forThe sum of the units (costs)

transferred out during the period plus the units (costs) in process at the end of the period.

3 - 26

Who Uses Process Systems?

Job Order Cost/ Process Cost Systems

Flow of Costs in Process Systems

Assigning Manufacturing Costs in Process

Equivalent Units

Production Cost Report

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Unit Production Costs

Costs expressed in terms of equivalent units of production.

3 - 27

Who Uses Process Systems?

Job Order Cost/ Process Cost Systems

Flow of Costs in Process Systems

Assigning Manufacturing Costs in Process

Equivalent Units

Production Cost Report

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Unit Materials Cost Computation

3 - 28

Who Uses Process Systems?

Job Order Cost/ Process Cost Systems

Flow of Costs in Process Systems

Assigning Manufacturing Costs in Process

Equivalent Units

Production Cost Report

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Cost Reconciliation Schedule

A schedule that shows that the total costs accounted for equal the total costs to be accounted for.

Mixing DepartmentCost Reconciliation Schedule

June 30,19xx

Illustration 3-22

Cost Accounted for Transferred Out(700,000 x .75) $ 525,000 Work in process June 30 Materials (200,000 x .50) $100,000 Conversion costs(120,000 x .25) 30,000 130,000Total Costs $655,000

Mixing DepartmentProduction Cost Report

For the Month Ended June 30, 2002

Illustration 3-23

Equivalent UnitsPhysical Conversion

Units Materials CostsQUANTITIES Step 1 Step 2Units to be accounted for Work in process, June 1 100,000 Started into production 800,000

Total units 900,000

Units accounted for Transferred out 700,000 700,000 700,000 Work in process, June 30 200,000 200,000 120,000 (200,000 x 60%)

Total units 900,000 900,000 820,000

COSTS ConversionUnit costs Step 3 Materials Costs Total Costs in June (a) 450,000$ 205,000$ 655,000$

Equivalent units (b) 900,000 820,000 Unit costs [(a)/(b)] 0.50$ 0.25$ 0.75$

Costs to be accounted for Work in process, June 1 85,000$ Started into production 570,000

Total costs 655,000$

Cost Reconciliation Schedule Step 4Costs accounted for Transferred out (700,000 x $0.75) 525,000$ Work in process, June 30 Materials (200,000 x $0.50) 100,000$ Conversion costs (120,000 x $0.25) 30,000 130,000

Total Costs 655,000$

3 - 31

Who Uses Process Systems?

Job Order Cost/ Process Cost Systems

Flow of Costs in Process Systems

Assigning Manufacturing Costs in Process

Equivalent Units

Production Cost Report

NextSlide

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EndEndShowShow

Operations Costing

A combination of a process cost and a job order cost system, in which products are manufactured primarily by standardized methods, with some customization.

3 - 32

Who Uses Process Systems?

Job Order Cost/ Process Cost Systems

Flow of Costs in Process Systems

Assigning Manufacturing Costs in Process

Equivalent Units

Production Cost Report

NextSlide

PreviousSlide

EndEndShowShow

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