C250 - Chapter 4 - Process Costing
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.