Chapter 4 process costing
cost per equivalent unit weighted average method
(cost of beginning work in process inventory + cost added during the period) / equivalent units of product
processing department
an organizational unit where work is performed on a product and where materials, labor or overhead costs are added to the product
weighted average method
blends together units and costs from the current period with units and costs from the prior period
similarities between job order and process costing
both systems have same basic purpose- assign material, labor, and manufacturing overhead costs to products and to provide mechanism for computing unit product costs
similarities between job order and process costing PART 2
both systems use the same basic manufacturing accounts, including manufacturing overhead, raw materials, work in process, and finished goods
applying costs weighted average method
costs per equivalent unit are used to value units in ending inventory and units that are transferred to the next department
conversion cost
direct labor costs + manufacturing overhead cost
equivalent units formula
number of partially completed units * percentage completion
differences between job order and process costing
process costing is used when a company produces a continuous flow of units that are indistinguishable from one another
two essential features of all products
the activity in the processing department is performed uniformly on all of the units passing through it the output of all processing department is homogenous; all of the units produced are identical
equivalent unit of production
units transferred to the next department or to finished goods + equivalent units in ending work in process inventory
operation costing
used in situations where products have some common characteristics and some individual characteristics
process costing
used most commonly in industries that convert raw materials into homogenous products, such as bricks soda or paper on a continuous base