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