z Process Costing

A Cost Accumulation Method

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Their Differences
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Their Differences
JOB ORDER
COSTING
 Unique jobs (heterogeneous) are
work on during a time period.
 Costs are accumulated by
individual job.
 Unit cost are computed by
dividing the total cost on the job
cost sheet by the number of units
on the job upon completion of the
job.
 The job cost sheet provides the
detail for the WIP account.
PROCESS
COSTING
 Homogeneous units pass through a
series of similar processes.
 Costs are accumulated by
processing department.
 Unit cost are computed by dividing
the individual departments' costs by
the equivalent production at the end
of the month.
 Cost of production report provides
the detail for the WIP for each
department.
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Their Differences (on costs accumulation
and flow of goods)
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Their Differences (on cost reports)
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Their Differences (on cost report)

Quantity
Schedule

Costs charged to
the department
(to be accounted)

Costs accounted for

(the accounting of
costs)
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Cost Flow Assumptions in Process
Costing
First In, First Out (FIFO)
– a method of inventory valuation which
assumes that the first items put into
process are also the first to complete
processing. Thus, cost of the remaining
inventory at the end of the accounting
period is based on the cost of the items
not yet completed in a particular
department/process.
Weighted Average
– in using this method, the cost of
production is divided by the total
number of equivalent units– which
can then be used to assign to both
ending inventory and the completed
units of the particular
department/process.
z sample problem
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