Chapter 4 Costing Systems: Process Costing Fall 2007 Crosson

Learning Objectives:  Comparing Cost Flows in Process and Job Costing Systems  How much does it cost?  Process Cost Report and Work in Process Inventory  Preparing a Process Cost Report— Average Costing Method  Preparing a Process Cost Report— FIFO Costing Method

BB +DM Purchased +IDM Purchased DM used (to WIP) IDM used (to OH) EB BB +DM +DL +OH COGM EB BB +COGM COGS EB Material Inventory Work in Process Inventory A Recap of Job Cost Cards Finished Goods Inventory Info. for the I/S’s COGM comes from this account! Job Costing RECAP:

In Process Costing the Work in Process Account is an account that summarizes a DEPARTMENT’S ACTIVITIES WIP Inventory Beginning Balance +Transferred in Costs +DM used +DL used +OH used Cost of Goods Manufactured or Completed OR Costs Transferred Out to Next Department Ending Balance Current Manufacturing Costs Info. for the I/S’s COGM comes from this account!

The Finished Goods Account: the account that summarizes completed and ready to sell product Finished Goods Inventory Beginning Balance(BB) +Cost of Goods Manufactured (COGM from WIP accounts) Cost of Goods Sold (to COGS) Ending Balance BB+COGM=COGAS

BB +DM Purchased +IDM Purchased DM used (to WIP) IDM used (to OH) EB BB +DM +DL +OH Costs Transferred OUT to the Next Department EB BB +COGM COGS EB Material Inventory Work in Process-Mixing Finished Goods Inventory Info. for the I/S’s COGM comes from this account! Process Costing RECAP: BB +Transferred IN +DM +DL +OH COGM EB Work in Process-Baking & Packaging

How much does it cost? Work in Process Inventory for a Department Beginning Balance +Transferred In costs +DM used +DL used +OH used Process Cost Report Determines…. Cost of Goods Manufactured or Completed OR Costs Transferred Out to Next Department Process Cost Report Determines…. Ending Balance

5 Steps in a Average Costing Process Cost Report  Account for Physical Units  Account for Efforts—a recap of all efforts  Account for Costs  Compute Cost per Equivalent Unit for all efforts  Assign costs to the cost the Department’s Cost of Goods Manufactured or Ending Balance

Examples of Process Cost Reports Average Costing  Exhibit 2  Review Problem Part 3. Good follow up exercises are SE7, SE8, SE9 and E10, E11, E12, E14 Look and listen to E13.

What Do You Know? Prepare Process (aka Production) Cost Report— Average Costing Method  Try P5  Try P8

5 Steps in a FIFO Process Cost Report  Account for Physical Units  Account for Efforts--% of Effort THIS Period  Account for Costs  Compute Cost per Equivalent Unit for THIS Period  Assign costs to the cost the Department’s Cost of Goods Manufactured or Ending Balance

Examples of Process Cost Reports FIFO Costing  Exhibit 1  Review Problem Part 1. Good follow up exercises are SE4, SE5, SE6 and E4, E5, E6, E9 Look and listen to E8.

What Do You Know? Prepare Process (aka Production) Cost Report- FIFO Costing Method  Try P4  Try P7

Homework: Problem 6