Presentation is loading. Please wait.

Presentation is loading. Please wait.

Managerial Accounting Wild and Shaw Third Edition Wild and Shaw Third Edition McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All.

Similar presentations


Presentation on theme: "Managerial Accounting Wild and Shaw Third Edition Wild and Shaw Third Edition McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All."— Presentation transcript:

1 Managerial Accounting Wild and Shaw Third Edition Wild and Shaw Third Edition McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

2 Chapter 3 Process Costing and Analysis

3 Conceptual Learning Objectives C1: Explain process operations and the way they differ from job order operations. C2: Define and compute equivalent units and explain their use in process cost accounting. C3: Define and prepare a process cost summary and describe its purposes. C4: Appendix: Explain and illustrate the accounting for production activity using FIFO. 3-3

4 A1: Compare process cost accounting and job order cost accounting. A2: Explain and illustrate a hybrid costing system. Analytical Learning Objectives 3-4

5 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: Record the transfer of completed goods to Finished Goods Inventory and Cost of Goods Sold. Procedural Learning Objectives 3-5

6 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. 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. Process Manufacturing Operations C1 3-6

7 Job Order Systems Custom orders Heterogeneous products Low production volume High product flexibility Low to medium standardization 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 Process Systems Repetitive operations Homogeneous products High production volume Low product flexibility High standardization Comparing Job Order and Process Production A1 3-7

8 Same objective: to determine the cost of products Same inventory accounts: raw materials, work in process, and finished goods Same overhead assignment method: predetermined rate times actual activity Job and Process Costing Similarities A1 3-8

9 Job and Process Costing Similarities and Differences A1 Journal entries for both job order and process costing are the identical The difference between job order and process costing lies in how the cost of goods transferred to finished goods is determined. 3-9

10 A1 Job Order and Process Costing Differences 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 Process costing The cost of goods transferred to finished goods equals the number of completed units times the cost per equivalent unit 3-10

11 Equivalent units is a concept expressing a number of partially completed units as a smaller number of fully completed units. Two one-half full pitchers are equivalent to one full pitcher. + = Equivalent Units of Production C2 3-11

12 Stage 3 50% of Labor and Overhead The process is now complete. Stage 2 25% of Labor and Overhead 60% of Material Stage 1 40% of Material 25% of Labor and Overhead Equivalent Units C2 3-12

13 Cost per equivalent unit = Product costs for the period Equivalent units for the period Cost Per Equivalent Unit C2 3-13

14 Labor Materials Indirect Factory Overhead Direct Delivered to Customers Goods in Process Finished Goods Allocated Overhead Process Manufacturing Operations GenX C3 3-14

15 Accounting for GenX C3 3-15

16 C3 Accounting for GenX 3-16

17 GenX uses a weighted average cost flow system with the following steps:  Determine the physical flow of units.  Compute equivalent units of production.  Compute the cost per equivalent unit.  Assign and reconcile costs. GenX uses a weighted average cost flow system with the following steps:  Determine the physical flow of units.  Compute equivalent units of production.  Compute the cost per equivalent unit.  Assign and reconcile costs. Accounting for GenX C3 3-17

18  Determine Physical Flow of Units C3 3-18

19  Compute Equivalent Units of Production - Materials C2 3-19

20  Compute Equivalent Units of Production – Direct Labor and Factory Overhead C2 3-20

21  Compute Equivalent Units of Production C2 3-21

22  Compute Cost Per Equivalent Unit C2 3-22

23 In the cost reconciliation, we will account for all costs incurred by assigning unit costs to the: A. 100,000 units transferred out. B. 20,000 units remaining in ending inventory. In the cost reconciliation, we will account for all costs incurred by assigning unit costs to the: A. 100,000 units transferred out. B. 20,000 units remaining in ending inventory.  Cost Reconciliation C3 3-23

24 C3 3-24

25 Process Cost Summary Helps managers control their departments. Provides cost information for financial statements. Shows the flow of units and costs through work in process. Helps factory managers evaluate department manager performance. C3 3-25

26 Process Cost Summary C3 3-26

27 C3 3-27

28 C3 3-28

29 C3 3-29

30 End of Chapter


Download ppt "Managerial Accounting Wild and Shaw Third Edition Wild and Shaw Third Edition McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All."

Similar presentations


Ads by Google