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