Module 8: Process Costing

First-In- First-Out Method (for Process Costing)

Determines the cost of equivalent units of production by accounting for beginning inventory costs separately from current period costs. It assumes the first units a started in the production process are the first units completed and sold

Equivalent Units of Production

Used to measure the direct materials, direct labor, and manufacturing OVH incurred on partially completed units and expressed in terms of fully completed units.

production cost report

a report prepared by a processing department for equivalent units of production, production costs, and the assignment of those costs to the completed and in process units.

physical units

actual units that the company will account for during the period

job order costing system

an accounting system that accumulates costs by job. Used by companies that manufacture unique products or provide specialized services

process costing system

an accounting system that accumulates costs by process. Used by companies that manufacture identical units through a series of uniform production steps or processes.

process

one of a series of steps in manufacturing production; usually associated with making large quantities of similar items

Cost Pool

An accumulation of individual costs.

Transferred in Costs

Costs that were incurred in a previous process and brought into a later process as part of the product's cost.

Weighted-Average Method (for Process Costing)

Determines the average cost of equivalent units of production by combining beginning inventory costs with current period costs.

Conversion Costs

The cost to convert direct materials into finished goods: Direct labor plus manufacturing overhead.