prepared by diane tanner university of north florida chapter 17 1 process costing
TRANSCRIPT
1
Prepared byDiane TannerUniversity of North Florida
Chapter 17
Process Costing
2
Assigning Costs to Cost Objects
Direct materials –Traced Direct labor – Traced Manufacturing overhead - Allocated
Direct materials – Allocated Direct labor – Allocated Manufacturing overhead - Allocated
Unique
HomogeneousJob Costing
Process Costing
3
The Use of Process Costing
Used in environments where Production passes through multiple cost centers A single product is produced on a continuing basis
or for a long period of time Computes unit costs by department Determines the cost of ending work in process
account and the cost transferred out of each work in process account
Cost flows are the same as job order costing:RM WIP FG CGS
4
Equivalent Units Estimates are made about the percentage of
completion of unfinished units How many full units could have been completed if
all efforts had been put forth to only start and complete units rather than leaving some units partially finished?
Why equivalent units?• Each department will have some partially completed
units in beginning and ending inventory• Partially completed units complicate the output and
the unit cost to assign to that output
5
Process Costing Methods
Two methods to calculate equivalent units Weighted-average method
Averages current period production costs with beginning inventory costs
Blends units and costs from prior and current periods
FIFO method Segregates current period production costs from the
production costs in beginning work-in-process Considered more accurate than the weighted-
average method
6
Production Cost Report
A separate report is created for each department, usually monthly
Identifies the total cost transferred out of each WIP account into FG, and the cost of ending WIP
Contains 5 sections1: Summarizes the flow of physical units of output2: Computes equivalent units3: Summarizes total costs to account for4: Computes the cost per equivalent unit5: Assigns total costs to units completed and to units in
ending work-in-process
7
Cost Categories on Production Cost Report
Costs are separately tracked in three categories: Direct materials Conversion costs
Assumes overhead is assigned at the same rate direct labor is incurred
Transferred-in costs Costs associated with units completed in the
previous department
8
The End