C250 - Chapter 4 - Process Costing

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complete the cost of flow journal entry

(transfer cost of Dept A to B) debit WIP dept B and credit WIP dept A debit finished goods and credit WIP B debit COGS and credit finished goods

cost of ending WIP inventory =

EUP x cost per equivalent unit

Equivalent Units of Production (EUP) - (Weighted-Average Method)

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. = Units completed and transferred out + EU in ending WIP inventory

Materials cost journal entry

(1st dept) debit WIP Dept A and credit raw materials (2nd dept) debit WIP Dept B and credit raw materials

cost per equivalent unit (weighted average)=

(cost of beginning WIP inventory + costs added during the period)/equivalent units of production

Equivalent Units (partially completed unites are translated into an equivalent number of fully completed unit)

= number of partially completed units x percentage completion The product of the number of partially completed units and their percentage of completion with respect to a particular cost. Equivalent units are the number of complete whole units that could be obtained from the materials and effort contained in partially completed units.

Process Costing

A costing method used when essentially homogeneous products are produced on a continuous basis. (differs from job-order costing used when many differ jobs are worked)

Operation Costing

A hybrid costing system used when products have some common characteristics and some individual characteristics.

FIFO Method

A process costing method in which equivalent units and unit costs relate only to work done during the current period.

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 work is performed on a product and where materials, labor, or overhead costs are added to the product.

Overhead costs journal entry

Debit WIP Dept A and credit manufacturing overhead

Labor costs journal entry

debit WIP Dept A and credit salaries and wages payable (traced to dept not individual jobs)

transfer in costs =

beginning WIP + Started into production - ending WIP

cost reconciliation

costs to be accounted for: Cost of beg WIP + Costs added to production costs accounted for: Cost of ending WIP + costs of units transferred out

cost Units completed and transferred out =

units transferred to next dept x cost per equivalent unit

3 differences between job-order costing and process costing

1. process costing is used when a company produces a continuous flow of units that are indistinguishable form one another. 2. under process costing it makes no sense to identify materials, labor, and overhead costs with a particular customer order. process costing accumulates costs by department rather than by order and assigns these costs uniformly to all units . 3. process costing system computes unit costs by department and not computed by job on a job cost sheet.

Conversion Cost

Direct labor cost + manufacturing overhead cost.


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