1. Who uses process cost systems?

A process costing system is used by companies that produce similar or identical units of
product in batches employing a consistent process. Examples of companies that use process
costing include Chevron Corporation (petroleum products), the Wrigley Company (chewing
gum), and Pittsburgh Paints (paint).

2. Explain the similarities and differences between job order cost and process cost
systems.

Raw materials inventory, work-in-process inventory, and finished goods inventory accounts
are used to record product cost information for both process costing and job costing systems.
However, several work-in-process inventory accounts are typically used in a process costing
system to track the flow of product costs through each production department. Thus each
department has its own work-in-process inventory account. The sum of all work-in-process
inventory accounts represents total work in process for the company.

3. Explain the flow of costs in a process cost system.

The typical manner in which costs flow in process costing is that direct material costs are
added at the beginning of the process, while all other costs (both direct labor and overhead) are
gradually added over the course of the production process. For example, in a food processing
operation, the direct material (such as a cow) is added at the beginning of the operation, and then
various rendering operations gradually convert the direct material into finished products (such as
steaks).
4. How to compute equivalent units under Weighted Average? FIFO?

Another acceptable method for determining unit cost under process costing is the first-in,
first-out (FIFO) cost method. Under the FIFO method, we assume any units that were not
completed last period (beginning work in process) are finished before anything else is started.
The following table shows the differences between the weighted average method and the FIFO
cost method:

5. Explain the four steps necessary to prepare a production cost report.

A cost
of

production report is prepared using the following four steps:

1. Determine the units to be assigned costs.

2. Compute equivalent units of production.
3. Determine the cost per equivalent unit.
4. Allocate costs to units transferred out and partially completed units.

References:

 https://www.accountingtools.com/articles/2017/5/14/process-costing-process-cost-
accounting
 https://courses.lumenlearning.com/acctmgrs/chapter/4-1-comparison-of-job-costing-with-
process-costing/#:~:text=Question%3A%20A%20process%20costing%20system,and
%20Pittsburgh%20Paints%20(paint)
 https://www.mvorganizing.org/how-do-you-prepare-a-production-cost-report/