Process Manufacturer: produces product that are indistinguishable from each other using a continuous production process Process

Cost System: The accounting system used by Process Manufactures Job Cost Systems: the accountings system used by producers whos products are distinguishable from one another and make jobs of product in batches Examples: Job Cost:

Movies

Shoes

Clothes

Each of these companies produces things that are different than the other things it creates. It makes the products in batches. Process Cost:

Oil/Gasoline

Chocolate

Soda Pop

Each of these companies produce a product continuously that looks taste and feels just like the last product it produced. In a process system, the work in process at the end of the period is determined by allocation cost between completed and partially completed task.

Process Cost Systems Cost Flow

Dbt Cost of Materials Purchased Credit Materials Used in assembly Credit Materials Used in Packing

Materials

Work in Process - Assembly

Dbt Materials, DL, Overhead Applied Credit Cost of Units Transferred to Packing

Work In Pricess - Testing

Dbt Cost from Assembly, DL, Overhead Applied Credit Cost of Units Transfered to Packing

Work in process Packing

Debit Cost from Testing, materials, DL, Overhead Applied Credit Completed Goods

Finished Goods

Debit Cost of Completed Goods Credit COGS

Credit Cost of Units Sold

COGS

Cost of Production Report

Step 1: Determine the Units to be assigned Cost

# of Units in beginning Inventory (A)

# of Units completed (B)

# of Units in ending inventory (C)

Unit to be assigned cost

Step 2: Compute Equivalent Cost of Production o Whole units are the number of units in production during a period weather finished or not o Equivalent Units (for Materials) are determined by multiplying whole units by the percent of materials added o Equivalent Units (for Conversion) are determined by multiplying whole units by the percent of conversion completed For (A) Percent of conversion is the inverse of % of completion Step 3: Determine the Cost Per Equivalent Unit

Direct Material Cost Per Equivalent Unit = Total Direct Materials for the Period Total Equivalent Units for Direct Materials Conversion Cost Per Equivalent Unit = Total Conversion Cost for the Period Total Equivalent Units of Conversion Cost Step 4: Allocate Cost to Units Transferred out and Partially Completed Units o For materials and conversion each multiplies #of units X percentage ( fount in step 2) X Equivalent unit cost. A

Transferred Out = Started and Completed + Inventory in Process (when material is all given in beginning)

Journal Entries
Material Requisition WIP - Mixing $X,XXX WIP -Packaging $X,XXX FOH- Mixing $X,XXX FOH-Packaging. $X,XXX Materials.. $X,XXX Direct Labor WIP-Mixing. $X,XXX WIP- Packaging $X,XXX Wages Payable $X,XXX Equipment Depreciation FOH- Mixing . $X,XXX FOH Packaging $X,XXX Accumulated Depreciation .. $X,XXX Applying FOH WIP- Mixing. $X,XXX WIP Packaging.. $X,XXX FOH- Mixing... $X,XXX FOH- Packaging .. $X,XXX Transfer Cost from Mixing to Packaging WIP- Packaging.. $X,XXX WIP- Mixing. $X,XXX

Transfer Goods out of Packaging to Finished Goods FG. $X,XXX WIP Packaging. $X,XXX Selling Good COGS... $X,XXX FG.. $X,XXX Materials+ WIP Every Department + Finished Goods = Total Inventory

Examples
18-1 a. Materials used by the blending department WIP Blending $XX,XXX Materials Cocoa beans $XX,XXX Sugar $XX,XXX Dehydrated Milk $XX,XXX b. Transfer from Blending to Molding WIP Molding $XX,XXX WIP Blending $XX,XXX c. Transfer from Molding to Packing WIP Packing $XX,XXX WIP Molding $XX,XXX d. Transfer of Box Chocolate to the Distribution Center Finished Goods $XX,XXX WIP Packing $XX,XXX e. Sale of Chocolate COGS $XX,XXX Finished Goods $XX,XXX

18-5 Total Whole Units 840 16760* 17600 940 18540 % Added 0 100% Equivalent Units

Inventory in Process Beginning Started and Completed Transferred out Inventory in Process at the End Total Units to be Assigned Cost

16760

100%

940 17700

Inventory in Process Beginning Started and Completed Transferred out Inventory in Process at the End Total Units to be Assigned Cost

Total Whole Units 840 16760* 17600 940 18540

% Conversion 25% 100%

Equivalent Units 210 16760

25%

235 17205

Inventory in Process Beginning Started and Completed Transferred out Inventory in Process at the End Total Units to be Assigned Cost

18-6 Drawing Department Conversion Total Whole Units % Conversion 5400 60% 68600* 74000 4100 78100 100%

Equivalent Units 3240 68600

55%

2255 74095

Inventory in Process Beginning Started and Completed Transferred out Inventory in Process at the End Total Units to be Assigned Cost

Drawing Department Materials Total Whole Units % Material Added 5400 0 68600* 74000 4100 78100 100%

Equivalent Units 0 68600

100%

4100 72700

Inventory in Process Beginning Started and Completed Transferred out Inventory in Process at the End Total Units to be Assigned Cost

Winding Department Conversion Total Whole Units % Conversion 2200 30% 71000* 73200 3000 76200 100%

Equivalent Units 660 71000

15%

450 72110

Inventory in Process Beginning Started and Completed Transferred out Inventory in Process at the End Total Units to be Assigned Cost

Winding Department Materials Total Whole Units % Material Added 2200 0 71000* 73200 3000 76200 100%

Equivalent Units 0 71000

100%

3000 74000