صفحه 1:
Cost Accounting
Foundations and
ٌ Evolutions
Kinney, Prather, Raiborn
Chapter 6
Process Costing
0 000 7
صفحه 2:
* Contrast process costing and job
order costing
٠ كأتطنا تصملحتشنو ود سته اودع 05
production are used in process
99
ae oe lalnes
production, unit costs, and
inventory values using weighted
average method of process ناد اليك
ا پا cy الل يي
صفحه 3:
* Compute equivalent units of
production, unit costs, and
inventory values using FIFO
method of process costing
¢ Explain how standard costs are
used in a process costing system
° Explain why a company would use a
hybrid costing system
pW ee Olek TCs
صفحه 4:
¢ (Appendix 1) Explain the
alternative methods used to
calculate equivalent units of
production
* (Appendix 2) Describe how normal
and abnormal spoilage losses are
treated in an EUP schedule
صفحه 5:
ie.
۰
5
aay oe
Job Order Process Costing
* Assign costs to ان
job and then to averaging
units within the technique, assign
job costs directly to
units produced
during the period
صفحه 6:
۹
۰
5
* The Numerator - Production Costs
- Accumulate costs by department
- Accumulate costs by product
~ Direct material from material requisitions
- Direct labor from time sheets and wage
Pelion
- Overhead
* Actual
+ Predetermined application rates
صفحه 7:
ie.
۰
5
ال ال
Direct material from material -
requisitions
Direct labor from time sheets and -
۱
Overhead -
انك
Predetermined application rates *
صفحه 8:
ie.
۰
5
° The Denominator - Units Produced
* Complicated by work in process
- Units started last period and
completed this period
- Units started this period and not
completed
* Convert partially completed units
to equivalent whole units
صفحه 9:
Approximation of the number of whole
units of output that could have been
produced from the actual effort
expended
* Includes units
Bracco PCa ase C Rts menntc Renee Ce
- started and finished this period
- نطق امه فصح 8منتوم ونطا 0عاتماو
* Assumes FIFO physical flow through
the production department
صفحه 10:
* Weighted Average Method
- ومصنطومم
ا لين “ا تفلك
*current period production
° FIFO Method
~ separates
* beginning work in process
*current period production
صفحه 11:
0
5
Weighted Average
Beginning WIP 100%
Started and finished 10)
Ending WIP
BES
Beginning WIP 1 completed
Started and finished
Ending WIP % completed
صفحه 12:
ie.
۰
5
* Direct material
- added at the beginning, during, and/or at
the end of process
* Direct labor
- added throughout the process
* Overhead
- added throughout the process
*based on direct 9
based on other, multiple cost drivers
صفحه 13:
ie.
۰
5
1 Units to account for
2 Units accounted for و
3 Determine equivalent
4 Costs to account for
5 Compute cost per equivalent timits
6 Assign costs to inventories
صفحه 14:
ی عاص ۹
amid 2
اك
(ON a as عوخا
سوه ۳ یج ماس رس(
Cost Duta:
]9 a a ne
Ore Gs Pe
:لجوج ۱
6ك
WS Daca ععصوصرة) جا“ عاعد() كد
صفحه 15:
0۱ Te ele
+ Eliminate periodic cost recomputations
* Same as FIFO computations
- emphasize current period costs and
* Inventories are stated at standard cost
* Variances are calculated for material,
labor, and overhead
صفحه 16:
۰ Assigns a “normal” production cost
ا ا ا ا
each period
4 تن
recognize and investigate
significant deviations from expected
production costs
. ie benchmarking with other
rms
صفحه 17:
ie.
۰
5
ات قطن ٠
Ty ل 1
* Various product lines ۳
- different direct material - job order
0
0000 g etd - job order costing
- same process - process costing
* Hybrid costing used for furniture,
clothing, jam
صفحه 18:
Oe) Cael
Cue eT
PCE
۵ aie
transferredout
0 aC 0
basis
Paar an
past inspection
point inending
هت
transferredout on
۲ عادو
صفحه 19:
* What is an equivalent unit of
production?
* What is the difference between the
weighted average and FIFO
methods of calculating equivalent
units?
* Why would a company use a hybrid
costing system?
pW ee Olek TCs
Cost Accounting
Foundations and
Evolutions
Kinney, Prather, Raiborn
Chapter 6
Process Costing
Learning Objectives
(1 of 3)
• Contrast process costing and job order
costing
• Explain why equivalent units of
production are used in process costing
• Calculate equivalent units of production,
unit costs, and inventory values using
weighted average method of process
costing
Learning Objectives
(2 of 3)
• Compute equivalent units of
production, unit costs, and
inventory values using FIFO
method of process costing
• Explain how standard costs are
used in a process costing system
• Explain why a company would use a
hybrid costing system
Learning Objectives
(3 of 3)
• (Appendix 1) Explain the
alternative methods used to
calculate equivalent units of
production
• (Appendix 2) Describe how normal
and abnormal spoilage losses are
treated in an EUP schedule
Job Order vs. Process
Costing
Job Order
• Assign costs to
job and then to
units within the
job
Process Costing
• Using an
averaging
technique, assign
costs directly to
units produced
during the period
Process Costing
• The Numerator - Production Costs
–
–
–
–
–
Accumulate costs by department
Accumulate costs by product
Direct material from material requisitions
Direct labor from time sheets and wage rates
Overhead
• Actual
• Predetermined application rates
Unit Cost =Production Costs
Production
Process Costing
• Production Costs
– Direct material from material requisitions
– Direct labor from time sheets and wage
rates
– Overhead
• Actual
• Predetermined application rates
Process Costing
• The Denominator - Units Produced
• Complicated by work in process
– Units started last period and
completed this period
– Units started this period and not
completed
• Convert partially completed units
to equivalent whole units
Unit Cost =Production Costs
Production
Equivalent Units of Production
(EUP)
• Approximation of the number of
whole units of output that could have
been produced from the actual effort
expended
• Includes units
– started last period and finished this
period
– started and finished this period
– started this period and not finished
• Assumes FIFO physical flow through
the production department
Two Process Costing
Methods
• Weighted Average Method
– combines
• beginning work in process
• current period production
• FIFO Method
– separates
• beginning work in process
• current period production
Process Costing Methods
Weighted Average
Beginning WIP
100%
Started and finished
100%
Ending WIP
% completed
FIFO
Beginning WIP
% completed
Started and finished
100%
Ending WIP
% completed
THE
DIFFERENCE
Process Costing
• Direct material
– added at the beginning, during, and/or at
the end of process
• Direct labor
– added throughout the process
• Overhead
– added throughout the process
• based on direct labor
• based on other, multiple cost drivers
Process Costing Steps
1 Units to account for
Units
2 Units accounted for
3 Determine equivalent units
4 Costs to account for
5 Compute cost per equivalent Costs
unit
6 Assign costs to inventories
Cost of Production Report
Name of Department
3
for the period --Production Data:
2
1
Units to account for
Units accounted for
EUP for each cost
Cost Data:
4
Costs to account for
5
Cost per EUP
6
Cost Assignment:
Transferred Out
Ending Work In Process Inventory
Process Costing with
Standard Costs
• Simplify costing process
• Eliminate periodic cost recomputations
• Same as FIFO computations
– emphasize current period costs and production
• Inventories are stated at standard cost
• Variances are calculated for material, labor,
and overhead
Process Costing with
Standard Costs
• Assigns a “normal” production
cost to the equivalent units of
output each period
• Allows managers to quickly
recognize and investigate
significant deviations from
expected production costs
• Allows benchmarking with other
firms
Hybrid Costing Systems
• Characteristics of job order and
process costing systems
• Various product lines
– different direct material - job order
costing
– different direct labor – job order costing
– same process - process costing
• Hybrid costing used for furniture,
clothing, jam
Appendix 2 - Spoilage
Normal
Spoilage
Continuous
Loss
Discrete
Loss
Abnormal
Spoilage
Loss in all
ending
Period expense
inventory and
in EUP
transferred out
units on an EUP
basis
Loss in all units
past inspection
Period expense
point in ending
in EUP
inventory and
transferred out on
an EUP basis
Questions
• What is an equivalent unit of
production?
• What is the difference between the
weighted average and FIFO methods
of calculating equivalent units?
• Why would a company use a hybrid
costing system?
