Who Uses

Process Systems?
Job Order Cost/
Process Cost
Managerial Accounting
Systems Second Edition
Flow of Costs in
Process Systems
Weygandt / Kieso / Kimmel
Assigning
Manufacturing
Costs in Process
Equivalent Units
Production Cost
Report

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3-1
 Process Cost Accounting
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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3-2
 Job Order Cost System
Who Uses
Process Systems? Cost are assigned to each job;
Job Order Cost/
Process Cost used where finished products
Systems
Flow of Costs in
can be individually identified
Process Systems
Assigning
Manufacturing
Costs in Process
Equivalent Units
Production Cost
Report

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3-3
 Illustration 3-1

Process Cost Systems

Who Uses
Process Systems? An accounting system used to
Job Order Cost/
Process Cost apply costs:
To similar products
Systems
Flow of Costs in
Process Systems
Assigning
That are mass-produced
Manufacturing
Costs in Process In a continuous fashion
Equivalent Units
Production Cost
Report

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3-4
Illustration 3-2
Illustration 3-2
Who Uses
In a process cost system, costs are
Process Systems? tracked through a series of
Job Order Cost/
Process Cost
connected manufacturing processes
Systems or departments; used for large
Flow of Costs in
Process Systems
volume production of uniform
Assigning products
Manufacturing
Costs in Process
Equivalent Units
Production Cost
Report

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3-7
Illustration 3-3
 Illustration 3-4

Job Order versus Process Cost System

 Illustration 3-5

Job Order versus Process Cost System

 Accumulating Manufacturing Costs-
Same As In Job Order From Chapter 2
Date Account Titles and Explanation Debit Credit
(1)
Jan. 4 Raw Materials Inventory 42,000
Accounts Payable 42,000
(Purchase of raw materials on account)

Date Account Titles and Explanation Debit Credit

(2)
Jan. 31 Factory Labor 32,000
Factory Wages Payable 27,000
Employer Payroll Taxes Payable 5,000
(To record factory labor costs)

Date Account Titles and Explanation Debit Credit

(3)
Jan. 31 Manufacturing Overhead 13,800
Utilities Payable 4,800
Prepaid Insurance 2,000
Accounts Payable - for repairs 2,600
Accumulated Depreciation 3,000
Property Taxes Payable 1,400
(To record overhead costs)
 Assigning Material Costs
Who Uses

• Fewer requisition slips than in

Process Systems?
Job Order Cost/
Process Cost
Systems
job order since materials are
Flow of Costs in
for a process rather than
Process Systems specific job.
Assigning
Manufacturing • Materials usually added at
Costs in Process
beginning of first process - but
Equivalent Units
Production Cost
sometimes added at other times.
Report

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 Assigning Direct Labor
Who Uses
Process Systems?
Job Order Cost/
Labor cost per process obtained
Process Cost
Systems
from payroll register or
Flow of Costs in departmental payroll
Process Systems
Assigning
summaries.
Manufacturing
Costs in Process
Equivalent Units
Production Cost
Report

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 Assigning Manufacturing Overhead
Who Uses

• Objective in assigning
Process Systems?
Job Order Cost/
Process Cost
Systems
manufacturing overhead to
Flow of Costs in departments is to allocate on
Process Systems
Assigning
objective and equitable basis.
Manufacturing
Costs in Process
Equivalent Units
Production Cost
Report

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 Assigning Manufacturing Costs
Date Account Titles and Explanation Debit Credit

Jan. 31 Work in Process -Machining xxxx

Work In Process - Assembly xxxx
Raw Materials Inventory xxxx
(To record materials used)

Date Account Titles and Explanation Debit Credit

Jan. 31 Work in Process -Machining xxxx

Work in Process-Assembling xxxx
Factory Labor
(To assign factory labor to job) xxxx

Date Account Titles and Explanation Debit Credit

xxxx
Jan. 31 Work in Process-Assembly
xxxx
Work in Process -Machining xxxx
Manufacturing Overhead
(To assign overhead to production)
 Transfer to Next Department
Who Uses
Process Systems?
Job Order Cost/
At the end of period an entry is
Process Cost
Systems
needed to record the cost of
Flow of Costs in goods transferred out of the
Process Systems
Assigning
department.
Manufacturing
Costs in Process
Equivalent Units
Production Cost
Report

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 Transfer to Next Department
Date Account Titles and Explanation Debit Credit

Work in Process -Assembly xxxx

Work In Process - Machining xxxx
(To record transfer of units to Assembly Department)

Transfer to Finished Goods

Date Account Titles and Explanation Debit Credit

Finished Goods Inventory xxxx

Work In Process - Assembling xxxx
(To record transfer of units to Finished Goods)

Transfer to Cost of Goods Sold

Date Account Titles and Explanation Debit Credit

Cost of Goods Sold xxxx

Finished Goods Inventory xxxx
(To record cost of units sold )
 Illustration 3-7

Equivalent Units of Production

Who Uses
Process Systems?
Job Order Cost/
A measure of the work done
Process Cost
Systems during the period, expressed
Flow of Costs in
Process Systems in fully completed units.
Assigning
Manufacturing
Costs in Process
Equivalent Units
Production Cost
Report

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 Weighted-average Method
Who Uses
Process Systems?
Job Order Cost/
Method used to compute
Process Cost
Systems equivalent units of
Flow of Costs in
Process Systems production which considers
Assigning
Manufacturing
Costs in Process
the degree of completion
Equivalent Units (weighting) of the units
Production Cost
Report completed and transferred
out and the ending work in
Previous
Slide
Next
Slide process.
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 Conversion Costs
Who Uses
Process Systems?
Job Order Cost/
The sum of labor costs and
Process Cost
Systems overhead costs.
Flow of Costs in
Process Systems
Assigning
Manufacturing
Costs in Process
Equivalent Units
Production Cost
Report

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 Production Cost Report
Who Uses
Process Systems?
Job Order Cost/
An internal report for
Process Cost
Systems management that shows
Flow of Costs in
Process Systems both production quantity
Assigning
Manufacturing
Costs in Process
and cost data for a
Equivalent Units production department.
Production Cost
Report

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 Illustration 3-12

Production Cost Report

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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 Physical Units
Who Uses
Process Systems?
Job Order Cost/
Actual units to be accounted
Process Cost
Systems for during a period,
Flow of Costs in
Process Systems irrespective of any work
Assigning
Manufacturing
Costs in Process
performed.
Equivalent Units
Production Cost
Report

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 Total Units (Costs) to Be
Who Uses
Process Systems? Accounted for
Job Order Cost/
Process Cost
Systems
The sum of the units (costs)
Flow of Costs in
Process Systems
started (or transferred) into
Assigning
Manufacturing
production during the period
Costs in Process
Equivalent Units
plus the units (costs) in
Production Cost
Report
process at the beginning of
the period.
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 Total Units (costs) Accounted for
Who Uses
Process Systems?
Job Order Cost/
The sum of the units (costs)
Process Cost
Systems transferred out during the
Flow of Costs in
Process Systems period plus the units (costs)
Assigning
Manufacturing in process at the end of the
Costs in Process
Equivalent Units period.
Production Cost
Report

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 Unit Production Costs
Who Uses
Process Systems?
Job Order Cost/
Costs expressed in terms of
Process Cost
Systems equivalent units of
Flow of Costs in
Process Systems production.
Assigning
Manufacturing
Costs in Process
Equivalent Units
Production Cost
Report

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 Unit Materials Cost Computation
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
Who Uses
Process Systems?
Job Order Cost/
A schedule that shows that
Process Cost
Systems the total costs accounted
Flow of Costs in
Process Systems for equal the total costs to
Assigning
Manufacturing
Costs in Process
be accounted for.
Equivalent Units
Production Cost
Report

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 Mixing Department Illustration 3-22

Cost Reconciliation Schedule

June 30,19xx

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) 30,000 130,000
Total Costs $655,000
 Mixing Department Illustration 3-23
Production Cost Report
For the Month Ended June 30, 2002
Equivale nt Units
Phys ical Conve r s ion
Units M ate r ials Cos ts
QUANTITIES Ste p 1 Ste p 2
Units to be accounte d for
Wor k in pr oce s s , June 1 100,000
Star te d into pr oduction 800,000
Total units 900,000

Units accounte d for

Tr ans fe r r e d out 700,000 700,000 700,000
Wor k in pr oce s s , June 30 200,000 200,000 120,000 (200,000 x 60%)
Total units 900,000 900,000 820,000

COSTS Conve r s ion

Unit cos ts Ste p 3 M ate r ials Cos ts Total
Cos ts in June (a) $ 450,000 $ 205,000 $ 655,000
Equivale nt units (b) 900,000 820,000
Unit cos ts [(a)/(b)] $ 0.50 $ 0.25 $ 0.75

Cos ts to be accounte d for

Wor k in pr oce s s , June 1 $ 85,000
Star te d into pr oduction 570,000
Total cos ts $ 655,000

Cos t Re conciliation Sche dule Ste p 4

Cos ts accounte d for
Tr ans fe r r e d out (700,000 x $0.75) $ 525,000
Wor k in pr oce s s , June 30
M ate r ials (200,000 x $0.50) $ 100,000
Conve r s ion cos ts (120,000 x $0.25) 30,000 130,000
Total Cos ts $ 655,000
 Operations Costing
Who Uses
Process Systems?
Job Order Cost/
A combination of a process cost
Process Cost
Systems and a job order cost system,
Flow of Costs in
Process Systems in which products are
Assigning
Manufacturing
Costs in Process
manufactured primarily by
Equivalent Units standardized methods, with
Production Cost
Report some customization.

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Who Uses
COPYRIGHT
Process Systems?
Job Order Cost/
Process Cost
Copyright
Systems © 2002, John Wiley & Sons, Inc. All rights reserved.
FlowReproduction
of Costs in or translation of this work beyond that permitted in
Section
Process Systems117 of the 1976 United States Copyright Act without the

express written permission of the copyright owner is unlawful.

Assigning
Manufacturing
Request
Costs in Process for further information should be addressed to the
Permissions
Equivalent Units Department, John Wiley & Sons, Inc. The purchaser
may make
Production Cost back-up copies for his/her own use only and not for
Report
distribution or resale. The Publisher assumes no responsibility
for errors, omissions, or damages, caused by the use of these
programs or from the use of the information contained herein.
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