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Chapter 21
Chapter 21
Similarities and Differences between Job Order Cost and Process Cost Systems.
Similarities
- Manufacturing cost elements
- Accumulation of the cost of materials, labor, and overhead
- Flow of costs
Differences
Job order cost Process cost
Products have Products are uniform or
unique/heterogeneous relatively homogeneous and
characteristics produced in a large volume
Costs assigned to each job Costs are tracked through a
series of connected
manufacturing processes or
departments.
WIP accounts One WIP account Multiple WIP accounts
a. Both a job order and a process cost system track the same three manufacturing cost elements
– direct materials, direct labor, and manufacturing overhead.
b. In a job order cost system, only one work in process account is used, whereas, in a process
cost system, multiple work in process accounts are used.
c. Manufacturing costs are accumulated the same way in a job order and in a process cost
system.
d. Manufacturing costs are assigned the same way in a job order and in a process cost system.
Direct materials
A process cost system requires fewer material requisition slips than a job order cost system.
Direct labor
Time tickets may be used in both systems.
Manufacturing overhead
3. Transfer
Monthly entry to transfer goods to next department:
Review
Equivalent units
Weighted-Average Method
Consider the degree of completion (weighting) of units completed and transferred out and the
ending work in process.
Most widely used method
Beginning work in process not part of the computation of equivalent units (không quan tâm
phần trăm/ số lượng Direct Materials, Conversion costs trong WIP Beginning, chỉ chú ý WIP
Ending)
Note: Conversion costs = Direct labor + MOH.
Example: The output of Kori Company’s Packaging Department during the period consists of
10,000 units completed and transferred out, and 5,000 units in ending work in process which are
70% completed.
Calculate the equivalent units of production.
Completed units 10,000
Example: Kellogg Company has produced Eggo® Waffles since 1970. Three departments
produce these waffles: Mixing, Baking, and Freezing/Packaging. The Mixing Department
combines dry ingredients, including flour, salt, and baking powder, with liquid ingredients,
including eggs and vegetable oil, to make waffle batter.
The illustration below provides information related to the Mixing Department at the end of June
Example: The Fabricating Department for Outdoor Essentials has the following production
and cost data for the current month.
Materials are entered at the beginning of the process. The ending work in process units are 30%
complete as to conversion costs. Compute the equivalent units of production for (a) materials and
(b) conversion costs.
Answer
Transferred out:
Materials: 15,000 units
CC = 15,000 units
WIP Ending:
Materials = 10,000 * 100% = 10,000 units
CC = 10,000 * 30% = 3,000 units
a) EUs of materials = TO + EB = 15,000 + 10,000 = 25,000 units
b) EUs of CC = TO + EB = 15,000 + 3,000 = 18,000 units
Production cost report
In order to complete a production cost report, the company must perform four steps, which
as a whole make up the process cost system.
1. Compute the physical unit flow.
2. Compute the equivalent units of production.
3. Compute unit production costs.
4. Prepare a cost reconciliation schedule.
The illustration below shows assumed data for the Mixing Department at Kellogg Company
for the month of June. We will use this information to complete a production cost report for
the Mixing Department
Compute the Physical Unit Flow (Step 1)
Follow: Beginning balance + Transferred in = Transferred out + Ending Balance
Largo Company has unit costs of $10 for materials and $30 for conversion costs. If
there are 2,500 units in ending work in process, 40% complete as to conversion
costs, and fully complete as to materials cost, the total cost assignable to the ending
work in process inventory is:
Answer:
WIP Ending:
Material = 2,500 units
CC = 2,500 * 40% = 1,000 units
TC = DM + CC = 2,500 x 10 + 1,000 x 30 = $55,000
In March, Rodayo Manufacturing had the following unit production costs: materials
$6 and conversion costs $9. On March 1, it had no work in process. During March,
Rodayo transferred out 12,000 units. As of March 31, 800 units that were 25%
complete as to conversion costs and 100% complete as to materials were in ending
the work in process. Assign the costs to the units transferred out and in process
a. $180,000
b. $185,000
c. $186,600
d. $189,000
Note: Đọc kỹ đề hỏi tìm Total Transfer out ($180,000) hay Total WIP Ending ($6,600)
hay Total TO & Total WIP Ending ($180,000 + $6,600).
No. Account Title Dr. Cr.
1/
Physical units
Cost to be accounted for
Work in process, July 1 500
Started into production 1000
Total units 1500
Cost accounted for
Transferred out 900
Work in process, July 31 600
Total units 1500
Equivalent units
Material Conversion cost
Cost accounted for
Transferred out 900 900
Work in process, July 31
(100% x 600) 600
(40% x 600) 240
Total cost 1500 1140
2/
Unit material cost
= Total material cost :
equivalent unit of material 2,1
Unit conversion cost
= Total conversion cost :
equivalent unit of conversion
cost 3
Total conversion cost = conversion cost in beginning Work in process + direct labor +
manufacturing overhead
Total material cost = material cost in beginning Work in process + direct material
3/
Cost accounted for
Transferred out ( 900 x 5,1) $4.590
Work in process, Ending:
Materials (100% x 600 x 2,1) $1.260
Conversion cost (40% x 600 x 3) $720 $1.980
Total costs $6.570
B)
Polk Company
Production cost
report
For the month end of
July 31, 2017
Equivalent units