4 process costing

2 Cost Categories

Materials cost and conversion cost

Equivalent units in ending WIP

Number of partially completed units x percentage completion of those units with respect to cost category

2 types of departments in large organizations

Operating and service

Equivalent Units

The product of the number of partially completed units and their percentage of completion with respect to a particular cost.

equivalent units of production

The units transferred to the next department (or to finished goods) during the period plus the equivalent units in the department's ending work in process inventory.

FIFO and weighted average methods will produce same results if

There are never any ending inventories

Units in beg. WIP + units started/transferred in =

Units in end WIP + units completed/transferred out

A separate _____ account is maintained for each processing department

WIP

Blends costs and outputs from current period from those in prior period

Weighted average method

In process costing, costs are______

Accumulated by department whereas in job order costing, they're computed by job

Costs to be accounted for

Cost of beginning WIP, costs added to production

Two calculations each department needs to make for financial reporting purposes

Cost of ending WIP inventory & cost of completed units that were transferred to next stage of production

Costs accounted for

Cost of ending WIP, cost of units transferred out

Process Costing

A costing method used when essentially homogeneous products are produced on a continuous basis

operation costing

A hybrid costing system used when products have some common characteristics and some individual characteristics; usually involves charging direct materials to batches and conversion costs to departments

cost per equivalent unit

(Cost of beginning WIP inventory + Cost added during period) / EU's of production

Weighted Average Method

a process costing method that blends together units and costs from both the current and prior periods

processing department

an organizational unit where materials, labor, or overhead costs are added to the product

Cost Reconciliation

determining whether the costs assigned to units transferred out and to units in ending work in process are equal to the costs in beginning work in process plus the manufacturing costs incurred in the current period.

Conversion Cost

direct labor + overhead