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8466714
8466714
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Comparison of Job-Order Costing and
Process Costing
Process
Process Job-order
Costing
Costing Costing
4-3
Differences Between Job-Order and
Process Costing
The work-in-process
account consists of
individual jobs in a
Direct Material
job-order cost system.
Finished
Direct Labor Jobs Goods
Manufacturing Cost of
Overhead Goods
Sold
4-4
Differences Between Job-Order and
Process Costing
The work-in-process
account consists of
individual products in a
Direct Material
process-cost system.
4-6
Process Cost Flows
Two Sequential Production Departments
Work-in-Process Inventory Work-in-Process Inventory
Production Department A Production Department B
Direct material Cost of goods completed
Direct labor in department A and Cost of goods completed
Applied manufacturing transferred to and transferred to
overhead department B finished goods
Direct material
Direct labor
Applied manufacturing
overhead
4-7
Equivalent Units: A Key Concept
Costs are accumulated for a period of time for products in
work-in-process inventory.
Products in work-in-process inventory at the beginning and
end of the period are only partially complete.
Equivalent units is a concept expressing these partially
completed products as a smaller number of fully
completed products.
4-8
Equivalent Units Example
Two half completed products are
equivalent to one completed product.
+ = l
4-9
Calculating and Using Equivalent Units of
Production
To calculate the direct materials and conversion costs per
equivalent unit for the period:
Materials
cost per Materials cost for the period
= Materials equivalent units for
equivalent
unit the period
Conversion
cost per Conversion cost for the period
equivalent = Conversion equivalent units for
unit the period
4-10
Departmental Production Report
Analysis of Calculation
physical flow of equivalent
of units. units.
Production
Report
Computation Analysis of
of unit costs. total costs.
4-11
Equivalent Units of Production –
Weighted-Average Method
The weighted-average method . . .
Makes no distinction between work done in the prior period and work
done in the current period.
Blends together units and costs from the prior period and the current
period.
4-12
Production Report Example
MVP Sports Equipment Company makes baseball gloves in two
departments, Cutting and Stitching.
MVP uses weighted-average process costing.
4-13
Production Report Example
Work in process, March 1: 20,000 units Cost
Materials: 100% complete. $ 50,000
Conversion: 10% complete. 7,200
Physical
Units
Work in process, March 1 20,000
Units started during March 30,000
Total units to account for 50,000
4-15
Production Report Example
Calculation of Equivalent Units
4-17
Production Report Example
Computation of unit costs
Direct
Material Conversion Total
Work in Process, March 1 $ 50,000 $ 7,200 $ 57,200
Costs incurred during March 90,000 193,500 283,500
Total costs to account for $ 140,000 $ 200,700 $ 340,700
Equivalent units 50,000 45,000
Cost per equivalent unit $ 2.80 $ 4.46 $ 7.26
4-19
Production Report Example
Analysis of total costs
Cost of goods completed and transferred during March
40,000 units x $7.26 per equivalent unit $ 290,400
4-20
Production Report Example
Analysis of total costs
Cost of goods completed and transferred during March
40,000 units x $7.26 per equivalent unit $ 290,400
4-21
Operation Costing
Operation costing employs some aspects
of both job-order and process costing.
4-22
Operation Costing
Operation costing employs some aspects
of both job-order and process costing.
4-23
End of Chapter 4
I’m ready to process
some leisure time.
4-24