Process Costing

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Job versus Process Costing

Job-Costing Systems Process-Costing

Systems
Distinct, identifiable
units of a product Masses of identical
or service or similar units of a
product or service
Examples:
Custom-made Examples:
machines, Food,
houses chemical processing

design product themself, mass produce, not prodcue

for any order

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Process Costing
 Process costing is a system where the unit cost of a
product or service is obtained by assigning total
costs to many identical or similar units.
 Each unit receives the same or similar amounts of
direct materials costs, direct labor costs, and
manufacturing overhead.
 Unit costs are computed by dividing total costs
incurred by the number of units of output from the
production process. total cost / no. of unit output

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Process-Costing Assumptions
 Direct materials are added at the beginning of the
production process, or at the start of work in a
subsequent department down the assembly line.
 Conversion costs are added equally along the
production process. when we use, we add.
eg: finish 50% of output -> add 50% conversion cost

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Five-Step Process-Costing Allocation
1. Summarize the flow of physical units of output.
2. Compute output in terms of equivalent units.
sp tương đương
3. Summarize total costs to account for .
4. Compute cost per equivalent unit.
5. Assign total costs to units completed and to units in
ending work-in-process.
Equivalent unit = degree of completion x physical units
eg: 2units of 50% completion
= 2 x 50% = 1 unit

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Equivalent Units
 A derived amount of output units that:
1. Takes the quantity of each input in units completed
and in unfinished units of work in process and
2. Converts the quantity of input into the amount of
completed output units that could be produced with
that quantity of input
 Are calculated separately for each input (direct
materials and conversion cost)
 When calculating equivalent units in step 2, focus
on quantities and disregard dollar amounts until
after the equivalent units are computed
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Steps 1 and 2 Illustrated

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General Ledger Cost Flows
Illustrated

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 Transferred-In Costs
 Are costs incurred in previous departments that are
carried forward as the products cost when it moves
to a subsequent process in the production cycle.
 Also called previous department costs.
 Journal entries are made to mirror the progress in
production from department to department.
 Transferred-in costs are treated as if they are a
separate type of direct material added at the
beginning of the process.
eg: sx 1 cái tượng: 3 bước: nặn -> nung -> hthanh
DM $10
DL -> $10 DM
DL Hall. All rights reserved.
OH© 2012 Pearson Prentice
OH
 Lecture example
completion
Physical Direct Conversion
Transferred in
units materials costs
$
Work in process, beginning (March 1) 240 $ 33,600
18,000
Degree of completion, BWIP 100% 0% 62.5%
Transferred in during March 400
Completed and transferred out during March 440
Work in process, ending (March 31) 200
Degree of completion, EWIP 100% 0% 80%
Total costs added during March
$ $
Direct material and conversion costs
13,200 48,600

Transferred in (WAC) $ 52,000

Transferred in (FIFO) $ 52,480

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Weighted-Average
Process-Costing Method
 Weighted-average costs is the total of all costs in the
work-in-process account divided by the total
equivalent units of work done to date. số sp tới thời điểm này
 The beginning balance of the work-in-process account
(work done in a prior period) is blended in with current
period costs.

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Weighted-Average
Process-Costing Method
 Calculates cost per equivalent unit of all work done to
date (regardless of the accounting period in which it
was done)
 Assigns this cost to equivalent units completed and
transferred out of the process, and to incomplete units
in still-in-process

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Steps 1 and 2, Illustrated
Step 2
Step 1 Equivalent units
WAC
Transferred Direct Conversion
Physical units
in materials costs

Work in process, beginning (March 1) 240

Transferred in during March 400

To account for 640

Completed and transferred out during 440 440 440
440
March
200 x 80%
Work in process, ending (March 31) 200 200 x100% 0 = 160
To account for 640
Equivilant units OFwork done to date 640 440 600
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Steps 3, 4, and 5, Illustrated
Transferred Direct Conversion
in materials costs
Total costs
Step 3 WIP, beginning 51,600 33,600 0 18,000

Costs added during March 113,800 52,000 13,200 48,600

Total costs to accounted for 165,400 85,600 13,200 66,600

640 440 600

Step 4 Cost per equivalent unit of work done to date $274.75 =133.75 = 30 =111

Step 5 Assignment of costs:

Completed and transferred out during March 440 x 133.75 440 x 30 440 x 111

Work in process, ending (March 31) 200 x 133.75 0 x 30 160 x 111

Total costs accounted for 165,400

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First-in, First-Out
Process-Costing Method
 Assigns the cost of the previous accounting period’s
equivalent units in beginning work-in-process
inventory to the first units completed and
transferred out of the process CF kì này / sp kì này only
 Assigns the cost of equivalent units worked on
during the current period first to complete
beginning inventory, next to stat and complete new
units, and lastly to units in ending work-in-process
inventory

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First-in, First-Out
Process-Costing Method
 A distinctive feature of FIFO process-costing method
is that work done on beginning inventory is kept
separate from work done in the current period.

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 Steps 1 and 2, Illustrated
Step 2
Step 1 Equivalent units

Direct Conversion
Physical units Transferred in
materials costs

Work in process, beginning (March 1) 240

Transferred in during March 400
To account for 640
Completed and transferred out during March 440
(100%-62.5%)x240
From BWIP hthanh nốt kì trc 240 0 240 = 90
Started and completed làm mới trg kì 200 200 200 200
Work in process, ending (March 31) dở dang 200 200 0 160
sang kì sau
To account for 640
Equivalent units of work done in March 400 440 450
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 Steps 3, 4, and 5, Illustrated
Transferred Direct Conversion
Total costs in materials costs
Step 3 WIP, beginning
Costs added during May 114,280 52,480 13,200 48,600
Total costs to accounted for
52,480/400 13,200/440 48,600/450
in March
Step 4 Cost per equivalent unit of work done to date 131.2 30 108

Step 5 Assignment of costs:

Completed and transferred out during March
Work in process, beginning (March 1) 33,600 0 18,000
Costs added to BWIP 0 240x30 90x108
From beginning
Started and completed 200x131.2 200x30 200x108
Work in process, ending (March 31) 200x131.2 0 160x108
Total costs accounted for
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© 2012 Pearson Prentice Hall. All rights reserved.