Managerial Accounting Second Edition Weygandt / Kieso / Kimmel

1. Managerial AccountingSecond EditionWeygandt / Kieso / Kimmel Prepared by: Ellen L. Sweatt Georgia Perimeter College ELS

2. Process Cost Accounting

3. Job Order Cost System Cost are assigned to each job; used where finished products can be individually identified

4. Illustration 3-1 Process Cost Systems An accounting system used to apply costs: • To similar products • That are mass-produced • In a continuous fashion

5. Illustration 3-2

6. Illustration 3-2

7. In a process cost system, costs are tracked through a series of connected manufacturing processes or departments; used for large volume production of uniform products

8. Illustration 3-3

9. Illustration 3-4 Job Order versus Process Cost System

10. Illustration 3-5 Job Order versus Process Cost System

11. From Chapter 2 Date Account Titles and Explanation Debit Credit (3) 13,800 Jan. 31 Manufacturing Overhead 4,8002,0002,6003,0001,400 Date Account Titles and Explanation Debit Credit Utilities Payable Date Account Titles and Explanation Debit Credit Prepaid Insurance (2) Accounts Payable - for repairs (1) 32,000 Jan. 31 Factory Labor Accumulated Depreciation 27,000 42,000 Jan. 4 Raw Materials Inventory Factory Wages Payable Property Taxes Payable 42,000 5,000 Accounts Payable Employer Payroll Taxes Payable (To record overhead costs) (Purchase of raw materials on account) (To record factory labor costs) Accumulating Manufacturing Costs- Same As In Job Order

12. Assigning Material Costs • Fewer requisition slips than in job order since materials are for a process rather than specific job. • Materials usually added at beginning of first process - but sometimes added at other times.

13. Assigning Direct Labor Labor cost per process obtained from payroll register or departmental payroll summaries.

14. Assigning Manufacturing Overhead • Objective in assigning manufacturing overhead to departments is to allocate on objective and equitable basis.

15. Assigning Manufacturing Costs Date Account Titles and Explanation Debit Credit xxxx Jan. 31 Work in Process -Machining xxxx Work In Process - Assembly xxxx Raw Materials Inventory (To record materials used) Account Titles and Explanation Date Debit Credit xxxxxxxx Jan. 31 Work in Process -Machining Work in Process-Assembling Factory Labor xxxx (To assign factory labor to job) Account Titles and Explanation Date Debit Credit xxxx xxxx Jan. 31 Work in Process-Assembly Work in Process -Machining xxxx Manufacturing Overhead (To assign overhead to production)

16. Transfer to Next Department At the end of period an entry is needed to record the cost of goods transferred out of the department.

17. Date Account Titles and Explanation Debit Credit Work in Process -Assembly xxxx Work In Process - Machining xxxx (To record transfer of units to Assembly Department) Date Account Titles and Explanation Debit Credit Finished Goods Inventory xxxx Work In Process - Assembling xxxx (To record transfer of units to Finished Goods) Date Account Titles and Explanation Debit Credit Cost of Goods Sold xxxx Finished Goods Inventory xxxx (To record cost of units sold ) Transfer to Next Department Transfer to Finished Goods Transfer to Cost of Goods Sold

18. Illustration 3-7 Equivalent Units of Production A measure of the work done during the period, expressed in fully completed units.

19. Weighted-average Method Method used to compute equivalent units of production which considers the degree of completion (weighting) of the units completed and transferred out and the ending work in process.

20. Conversion Costs The sum of labor costs and overhead costs.

21. Production Cost Report An internal report for management that shows both production quantity and cost data for a production department.

22. Illustration 3-12 Production Cost Report

23. Physical Units Actual units to be accounted for during a period, irrespective of any work performed.

24. Total Units (Costs) to Be Accounted for The sum of the units (costs) started (or transferred) into production during the period plus the units (costs) in process at the beginning of the period.

25. Total Units (costs) Accounted for The sum of the units (costs) transferred out during the period plus the units (costs) in process at the end of the period.

26. Unit Production Costs Costs expressed in terms of equivalent units of production.

27. Unit Materials Cost Computation

28. Cost Reconciliation Schedule A schedule that shows that the total costs accounted for equal the total costs to be accounted for.

29. Illustration 3-22 Mixing Department Cost Reconciliation Schedule June 30,19xx Cost Accounted for Transferred Out(700,000 x .75) $ 525,000 Work in process June 30 Materials (200,000 x .50) $100,000 Conversion costs(120,000 x .25) 30,000130,000 Total Costs $655,000

30. Mixing Department Production Cost Report For the Month Ended June 30, 2002 Illustration 3-23

31. Operations Costing A combination of a process cost and a job order cost system, in which products are manufactured primarily by standardized methods, with some customization.