1. 3 - 1 WhoWho Uses Process Systems? Job Order Cost/ Process Cost Systems Flow of Costs in Process Systems Assigning Assigning Manufacturing Costs in Process EquivalentEquivalent Units ProductionProduction Cost Report Next Slide Previous Slide End Show

2. 3 - 2 WhoWho Uses Process Systems? Job Order Cost/ Process Cost Systems Flow of Costs in Process Systems Assigning Assigning Manufacturing Costs in Process EquivalentEquivalent Units ProductionProduction Cost Report Next Slide Previous Slide End Show Process Cost Accounting

3. 3 - 3 WhoWho Uses Process Systems? Job Order Cost/ Process Cost Systems Flow of Costs in Process Systems Assigning Assigning Manufacturing Costs in Process EquivalentEquivalent Units ProductionProduction Cost Report Next Slide Previous Slide End Show Job Order Cost System Cost are assigned to each job; used where finished products can be individually identified

4. 3 - 4 WhoWho Uses Process Systems? Job Order Cost/ Process Cost Systems Flow of Costs in Process Systems Assigning Assigning Manufacturing Costs in Process EquivalentEquivalent Units ProductionProduction Cost Report Next Slide Previous Slide End Show Process Cost Systems An accounting system used to apply costs:  To similar products  That are mass-produced  In a continuous fashion Illustration 3-1

5. Illustration 3-2

7. 3 - 7 WhoWho Uses Process Systems? Job Order Cost/ Process Cost Systems Flow of Costs in Process Systems Assigning Assigning Manufacturing Costs in Process EquivalentEquivalent Units ProductionProduction Cost Report Next Slide Previous Slide End Show In a process cost system, costs are tracked through a series of connected manufacturing processes or departments; used for large volume production of uniform products

8. Illustration 3-3

9. Job Order versus Process Cost System Illustration 3-4

10. Job Order versus Process Cost System Illustration 3-5

11. Accumulating Manufacturing Costs- Same As In Job Order DateAccount Titles and ExplanationDebitCredit (3) Jan. 31 Manufacturing Overhead Utilities Payable Prepaid Insurance Accounts Payable - for repairs Accumulated Depreciation Property Taxes Payable (To record overhead costs) 13,800 4,800 2,000 2,600 3,000 1,400 DateAccount Titles and ExplanationDebitCredit (2) Jan. 31Factory Labor Factory Wages Payable Employer Payroll Taxes Payable (To record factory labor costs) 32,000 27,000 5,000 DateAccount Titles and ExplanationDebitCredit (1) Jan. 4Raw Materials Inventory Accounts Payable (Purchase of raw materials on account) 42,000 From Chapter 2

12. 3 - 12 WhoWho Uses Process Systems? Job Order Cost/ Process Cost Systems Flow of Costs in Process Systems Assigning Assigning Manufacturing Costs in Process EquivalentEquivalent Units ProductionProduction Cost Report Next Slide Previous Slide End Show Assigning Material Costs Fewer requisition slips than in job order since materials are for a process rather than specific job. Materials usually added at beginning of first process - but sometimes added at other times.

13. 3 - 13 WhoWho Uses Process Systems? Job Order Cost/ Process Cost Systems Flow of Costs in Process Systems Assigning Assigning Manufacturing Costs in Process EquivalentEquivalent Units ProductionProduction Cost Report Next Slide Previous Slide End Show Assigning Direct Labor Labor cost per process obtained from payroll register or departmental payroll summaries.

14. 3 - 14 WhoWho Uses Process Systems? Job Order Cost/ Process Cost Systems Flow of Costs in Process Systems Assigning Assigning Manufacturing Costs in Process EquivalentEquivalent Units ProductionProduction Cost Report Next Slide Previous Slide End Show Assigning Manufacturing Overhead Objective in assigning manufacturing overhead to departments is to allocate on objective and equitable basis.

15. Assigning Manufacturing Costs DateAccount Titles and ExplanationDebitCredit Jan. 31 Work in Process -Machining Work In Process - Assembly Raw Materials Inventory (To record materials used) xxxx Date Account Titles and Explanation DebitCredit Jan. 31Work in Process -Machining Work in Process-Assembling Factory Labor (To assign factory labor to job) xxxx xxxx xxxx Date Account Titles and Explanation DebitCredit Jan. 31Work in Process-Assembly Work in Process -Machining Manufacturing Overhead (To assign overhead to production) xxxx

16. 3 - 16 WhoWho Uses Process Systems? Job Order Cost/ Process Cost Systems Flow of Costs in Process Systems Assigning Assigning Manufacturing Costs in Process EquivalentEquivalent Units ProductionProduction Cost Report Next Slide Previous Slide End Show Transfer to Next Department At the end of period an entry is needed to record the cost of goods transferred out of the department.

17. Transfer to Next Department DateAccount Titles and ExplanationDebitCredit Work in Process -Assembly Work In Process - Machining (To record transfer of units to Assembly Department) xxxx DateAccount Titles and ExplanationDebitCredit Finished Goods Inventory Work In Process - Assembling (To record transfer of units to Finished Goods) xxxx DateAccount Titles and ExplanationDebitCredit Cost of Goods Sold Finished Goods Inventory (To record cost of units sold ) xxxx Transfer to Finished Goods Transfer to Cost of Goods Sold

18. 3 - 18 WhoWho Uses Process Systems? Job Order Cost/ Process Cost Systems Flow of Costs in Process Systems Assigning Assigning Manufacturing Costs in Process EquivalentEquivalent Units ProductionProduction Cost Report Next Slide Previous Slide End Show Equivalent Units of Production A measure of the work done during the period, expressed in fully completed units. Illustration 3-7

19. 3 - 19 WhoWho Uses Process Systems? Job Order Cost/ Process Cost Systems Flow of Costs in Process Systems Assigning Assigning Manufacturing Costs in Process EquivalentEquivalent Units ProductionProduction Cost Report Next Slide Previous Slide End Show Weighted-average Method Method used to compute equivalent units of production which considers the degree of completion (weighting) of the units completed and transferred out and the ending work in process.

20. 3 - 20 WhoWho Uses Process Systems? Job Order Cost/ Process Cost Systems Flow of Costs in Process Systems Assigning Assigning Manufacturing Costs in Process EquivalentEquivalent Units ProductionProduction Cost Report Next Slide Previous Slide End Show Conversion Costs The sum of labor costs and overhead costs.

21. 3 - 21 WhoWho Uses Process Systems? Job Order Cost/ Process Cost Systems Flow of Costs in Process Systems Assigning Assigning Manufacturing Costs in Process EquivalentEquivalent Units ProductionProduction Cost Report Next Slide Previous Slide End Show Production Cost Report An internal report for management that shows both production quantity and cost data for a production department.

22. 3 - 22 WhoWho Uses Process Systems? Job Order Cost/ Process Cost Systems Flow of Costs in Process Systems Assigning Assigning Manufacturing Costs in Process EquivalentEquivalent Units ProductionProduction Cost Report Next Slide Previous Slide End Show Production Cost Report Illustration 3-12

23. 3 - 23 WhoWho Uses Process Systems? Job Order Cost/ Process Cost Systems Flow of Costs in Process Systems Assigning Assigning Manufacturing Costs in Process EquivalentEquivalent Units ProductionProduction Cost Report Next Slide Previous Slide End Show Physical Units Actual units to be accounted for during a period, irrespective of any work performed.

24. 3 - 24 WhoWho Uses Process Systems? Job Order Cost/ Process Cost Systems Flow of Costs in Process Systems Assigning Assigning Manufacturing Costs in Process EquivalentEquivalent Units ProductionProduction Cost Report Next Slide Previous Slide End Show Total Units (Costs) to Be Accounted for The sum of the units (costs) started (or transferred) into production during the period plus the units (costs) in process at the beginning of the period.

25. 3 - 25 WhoWho Uses Process Systems? Job Order Cost/ Process Cost Systems Flow of Costs in Process Systems Assigning Assigning Manufacturing Costs in Process EquivalentEquivalent Units ProductionProduction Cost Report Next Slide Previous Slide End Show Total Units (costs) Accounted for The sum of the units (costs) transferred out during the period plus the units (costs) in process at the end of the period.

26. 3 - 26 WhoWho Uses Process Systems? Job Order Cost/ Process Cost Systems Flow of Costs in Process Systems Assigning Assigning Manufacturing Costs in Process EquivalentEquivalent Units ProductionProduction Cost Report Next Slide Previous Slide End Show Unit Production Costs Costs expressed in terms of equivalent units of production.

27. 3 - 27 WhoWho Uses Process Systems? Job Order Cost/ Process Cost Systems Flow of Costs in Process Systems Assigning Assigning Manufacturing Costs in Process EquivalentEquivalent Units ProductionProduction Cost Report Next Slide Previous Slide End Show Unit Materials Cost Computation

28. 3 - 28 WhoWho Uses Process Systems? Job Order Cost/ Process Cost Systems Flow of Costs in Process Systems Assigning Assigning Manufacturing Costs in Process EquivalentEquivalent Units ProductionProduction Cost Report Next Slide Previous Slide End Show Cost Reconciliation Schedule A schedule that shows that the total costs accounted for equal the total costs to be accounted for.

29. Mixing Department Cost Reconciliation Schedule June 30,19xx Illustration 3-22 Cost Accounted for Transferred Out(700,000 x.75) $ 525,000 Work in process June 30 Materials (200,000 x.50) $100,000 Conversion costs(120,000 x.25) 30,000 130,000 Total Costs $655,000

30. Mixing Department Production Cost Report For the Month Ended June 30, 2002 Illustration 3-23

31. 3 - 31 WhoWho Uses Process Systems? Job Order Cost/ Process Cost Systems Flow of Costs in Process Systems Assigning Assigning Manufacturing Costs in Process EquivalentEquivalent Units ProductionProduction Cost Report Next Slide Previous Slide End Show Operations Costing A combination of a process cost and a job order cost system, in which products are manufactured primarily by standardized methods, with some customization.

32. 3 - 32 WhoWho Uses Process Systems? Job Order Cost/ Process Cost Systems Flow of Costs in Process Systems Assigning Assigning Manufacturing Costs in Process EquivalentEquivalent Units ProductionProduction Cost Report Next Slide Previous Slide End Show