Professional Documents
Culture Documents
Learning objectives
• Distinguish between job order costing and
process costing
• Understand the flow of production and how
manufacturing cost are traced to process
costing
• Compute equivalent units
• Use process costing in a second or later
production department
Job Costing vs Process Costing
Similarities
Product cost
Material Labor Manuf.
cost cost OH cost
The flow od
accounting
Raw Wage Manuf. records is
material payable OH basically same
Manufacturing account
WIP FG COGS
Job order costing vs Process costing
Differences
Unique Standard
The uniqueness of product product/heterogeneous product/homogenous
Size of job Small batches Mass production
DM, labor and OH are RM, labor and OH are
Cost assignment
assigned to job assigned to department
Unit cost information comes Departemental
Job cost sheet
from production cost
Much more record Cost aggregates by
keeping as DM, labor department, and so
Record keeping
and OH are charged to requires less record
specific job keeping
Several WIP, one for
Inventory account One WIP
each department
Flow of cost
Job order costing
WIP
Job 200
Raw material
Finished
Direct labor Job 201 COGS
goods
Manufacturing
overhead applied Job 202
Flow of cost
Process costing
WIP
WIP
Dept A
Raw material
WIP Finished
Direct labor COGS
Dept B goods
Manufacturing
overhead applied
WIP
Dept C
Cost flow in process costing
Inventory flow
Conversion cost Equivalent unit
assumption
Direct labor
Manufacturing
overhead
Sequential processing from manufacture of Healthblend’s mineral and vitamin
Transferred Transferred
Department B
IN OUT
FIFO
Beginning WIP Ending WIP
(BWIP) (EWIP)
Weighted
Equivalent unit = Number of partially complete X
average
Percentage of completion
• Is a measure of the work done during the period
Equivalent units • It is expressed in full unit and used to determine the
unit cost of product in process costing
Cost of production
report is prepared
Separate inventory
cost
40%
completed
Require :
Calculate the equivalent units for October
Solution :
and
Require :
Calculate the equivalent units for May
Solution :
Production :
Unit in process, July 1, 75% completed 20,000 gallons
Unit completed and transferred out 50,000 gallons
Unit in process, July 31, 25 % completed 10,000 gallons
Cost :
Work in process, July 1 $ 3,525
Cost added during July $ 10,125
Required :
1. Calculate an output measure for July
2. Assign costs to unit transferred out and EWIP using the weighted average method
Weighted average method
BWIP EWIP
Total
Manufacturing cost
13,650
is not Equivalent
Physical unit
unit
They may be in
different stage of
any completion
Physical flow (1)
BWIP EWIP
a. Unit information section includes physical unit flow and degree of completion
Cost BWIP + Cost incurred during period = Cost of goods transferred out + Cost EWIP
Production :
Unit in process, July 1, 75% completed 20,000 gallons
Unit completed and transferred out 50,000 gallons
Unit in process, July 31, 25 % completed 10,000 gallons
BWIP = 20,000
+
Unit started and completed = 30,000
+
EWIP, 25% complete = 2,500
= 52,500
and
Total manufacturing cost = WIP, beginning + cost added during the period
BWIP cost
+ July cost
$ 3,525
$ 10,125
Total
Manufacturing cost
13,650
UNIT INFORMATION
Physical flow
Units to account for : Units accounted for
Units in BWIP 20,000 Unit completed 50,000
Units started 40,000 Units in EWIP 10,000
Total units account for 60,000 Total units accounted for 60,000
Equivalent unit
Unit completed 50,000
Units in EWIP 2,500
Total equivalent unit 52,500
Healthblend company
Mixing department
Production report for July 20XX
Weighted average method
COST INFORMATION