chapter 16 n.
Download
Skip this Video
Loading SlideShow in 5 Seconds..
Chapter 16 PowerPoint Presentation
Download Presentation
Chapter 16

Loading in 2 Seconds...

play fullscreen
1 / 56

Chapter 16 - PowerPoint PPT Presentation


  • 121 Views
  • Uploaded on

Chapter 16. Process Costing and Analysis. Conceptual Learning Objectives. C1: Explain process operations and the way they differ from job order operations C2: Define equivalent units and explain their use in process cost accounting

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

Chapter 16


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
chapter 16

Chapter 16

Process Costing and Analysis

conceptual learning objectives
Conceptual Learning Objectives

C1: Explain process operations and the way they differ from job order operations

C2: Define equivalent units and explain their use in process cost accounting

C3: Explain the four steps in accounting for production activity in a period

C4: Define a process cost summary and describe its purposes

C5: Appendix 16A: Explain and illustrate the four steps in accounting for production activity using FIFO

analytical learning objectives
Analytical Learning Objectives

A1: Compare process cost accounting and job order cost accounting

A2: Explain and illustrate a hybrid costing system

procedural learning objectives
Procedural Learning Objectives

P1:Record the flow of direct materials costs in process cost accounting

P2: Record the flow of direct labor costs in process cost accounting

P3: Record the flow of factory overhead costs in process cost accounting

P4: Compute equivalent units produced in a period

P5: Prepare a process cost summary

P6: Record the transfer of completed goods to Finished Goods Inventory and Cost of Goods Sold

process manufacturing operations
Process Manufacturing Operations

C1

  • Used for production of small, identical, low-cost items.
  • Mass produced in automated continuous production process.
  • Costs cannot be directly traced to each unit of product.
comparing job order and process production
Job Order Systems

Custom orders

Heterogeneous products

Low production volume

High product flexibility

Low to medium standardization

Process Systems

Repetitive operations

Homogeneous products

High production volume

Low product flexibility

High standardization

Comparing Job Order and Process Production

A1

Exh.

20-2

job order and process cost accounting

The Goods in Process account consists of individualjobsin ajob ordersystem.

Job Order and Process Cost Accounting

A1

DirectMaterials

DirectLabor

FinishedGoods

Jobs

FactoryOverhead

Cost per unit for each job

job order and process cost accounting1
Job Order and Process Cost Accounting

A1

The Goods in Process account consists of specificprocessesin aprocess cost system.

DirectMaterials

DirectLabor

FinishedGoods

Processes

FactoryOverhead

Cost per unit processed

job and process costing similarities

Sameobjective:to determine the cost of products

Sameinventory accounts:raw materials, work in process, and finished goods

Sameoverhead assignment method:predetermined rate times actual activity

Job and Process Costing Similarities

A1

job and process costing similarities and differences

The difference between job order and process costing lies in how the cost of goods transferred to finished goods is determined.

Journal entries for both job order and process costing are the identical

Job and Process Costing Similarities and Differences

A1

job order and process costing differences
Job Order and Process Costing Differences

A1

Process costing

The cost of goods transferred to finished goods equals the number of completed units times the cost per equivalent unit

Job order costing

The cost of goods transferred to finished goods is equal to the sum of all of the completed jobs for that period

equivalent units of production
Equivalent Units of Production

C2

Costs are accumulated for a period of time by process or department.

Unit cost is computed by dividing the accumulated costs by the number ofequivalentunits produced in the period.

equivalent units of production1

+

=

Equivalent Units of Production

C2

Equivalent units is a concept expressing a number of partially completed units as a smaller number of fully completed units.

Twoone-half full pitchers are equivalent to one full pitcher.

question
Question

C2

For the current period, PencilCo started 15,000 units and completed 10,000 units, leaving 5,000 units in process 30 percent complete. How many equivalent units of production did PencilCo have for the period?

a. 10,000

b. 11,500

c. 1,500

d. 15,000

slide15

Question

C2

For the current period, PencilCo started 15,000 units and completed 10,000 units, leaving 5,000 units in process 30 percent complete. How many equivalent units of production did PencilCo have for the period?

a. 10,000

b. 11,500

c. 1,500

d. 15,000

10,000 units + (5,000 units × .30) = 11,500 equivalent units

cost per equivalent unit

Cost perequivalent unit

Product costs for the periodEquivalent units for the period

=

Cost Per Equivalent Unit

C2

question1
Question

C2

Now assume that PencilCo incurred $27,600 in production costs. What was PencilCo’s cost per unit for the period?

a. $1.84

b. $2.40

c. $2.76

d. $2.90

slide18

C2

Question

Now assume that PencilCo incurred $27,600 in production costs. What was PencilCo’s cost per unit for the period?

a. $1.84

b. $2.40

c. $2.76

d. $2.90

$27,600 ÷ 11,500 equivalent units

= $2.40 per equivalent unit

equivalent units
Equivalent Units

C2

40% ofMaterial

Equivalent units may be different for material and labor and overhead at different stages of a process.

Stage 1

25% ofLabor andOverhead

At completion of Stage 1 of the process, materialis 40% complete, but labor and overhead are only25% complete.

equivalent units1
Equivalent Units

C2

40% ofMaterial

60% ofMaterial

+

=

100%

Stage 1

Stage 2

25% ofLabor andOverhead

25% ofLabor andOverhead

=

+

50%

equivalent units2
Equivalent Units

C2

40% ofMaterial

60% ofMaterial

Stage 1

Stage 2

Stage 3

25% ofLabor andOverhead

25% ofLabor andOverhead

50% ofLabor andOverhead

The process is now complete.

process manufacturing operations genx

FinishedGoods

DeliveredtoCustomers

Process Manufacturing Operations GenX

C3

Exh.

20-5

Direct

Materials

Indirect

Goods in Process

FactoryOverhead

AllocatedOverhead

Indirect

Direct

Labor

accounting for genx3
Accounting for GenX

C5

GenX uses a weighted average cost flow system with the following four steps:

  • Determine physical flow of units.
  • Compute equivalent units of production.
  • Compute cost per equivalent unit.
  • Assign and reconcile costs.
cost reconciliation

In the cost reconciliation, we willaccount for all costs incurredby assigning unit costs to the:

    • A. 100,000 units transferred out.
    • B. 20,000 units remaining in ending inventory.
Cost Reconciliation

C5

slide35

Exh.

20-18

C5

process cost summary

Shows the flowof units and coststhrough work inprocess.

Provides costinformation forfinancial statements.

ProcessCostSummary

Helps factorymanagers evaluatedepartment managerperformance.

Helps managerscontrol theirdepartments.

Process Cost Summary

C4

process cost summary1

We will illustrate the process cost summary for GenX in three sections:

    • Costs charged to production.
    • Equivalent unit of production and costs per equivalent unit.
    • Cost assignment and reconciliation
Process Cost Summary

C4

hybrid costing systems
Hybrid Costing Systems

A2

Hybrid costing systems contain featuresof both job order and process operations.

Job OrderCosting

Hybrid Costing

ProcessCosting

Materialcosts areaccounted for usinga job order system.

Conversioncosts areaccounted for usinga process system.

process costing typical accounting entries

Let’s look at the accounting journal entries for a process cost system. We’ll omit the numbers so that we can focus on accounts.

Process CostingTypical Accounting Entries

C4