Chapter 4 Costing Systems: Process Costing

1. Chapter 4Costing Systems: Process Costing Fall 2007 Crosson

2. Learning Objectives: Comparing Cost Flows in Process and Job Costing Systems How much does it cost? Process Cost Report and Work in Process Inventory Preparing a Process Cost Report—Average Costing Method Preparing a Process Cost Report—FIFO Costing Method

3. Material Inventory Job Costing RECAP: Work in Process Inventory A Recap of Job Cost Cards Info. for the I/S’s COGM comes from this account! Finished Goods Inventory

4. In Process Costing the Work in Process Account is an account that summarizes a DEPARTMENT’S ACTIVITIES Current Manufacturing Costs WIP Inventory Info. for the I/S’s COGM comes from this account!

5. The Finished Goods Account: the account that summarizes completed and ready to sell product Finished Goods Inventory BB+COGM=COGAS

6. Material Inventory Process Costing RECAP: Work in Process-Mixing Info. for the I/S’s COGM comes from this account! Work in Process-Baking & Packaging Finished Goods Inventory

7. How much does it cost? Work in Process Inventory for a Department

8. 5 Steps in a Average Costing Process Cost Report • Account for Physical Units • Account for Efforts—a recap of all efforts • Account for Costs • Compute Cost per Equivalent Unit for all efforts • Assign costs to the cost the Department’s Cost of Goods Manufactured or Ending Balance

9. Examples of Process Cost ReportsAverage Costing • Exhibit 2 • Review Problem Part 3. Good follow up exercises are SE7, SE8, SE9 and E10, E11, E12, E14 Look and listen to E13.

10. What Do You Know? Prepare Process (aka Production) Cost Report— Average Costing Method Try P5 Try P8

11. 5 Steps in a FIFO Process Cost Report • Account for Physical Units • Account for Efforts--% of Effort THIS Period • Account for Costs • Compute Cost per Equivalent Unit for THIS Period • Assign costs to the cost the Department’s Cost of Goods Manufactured or Ending Balance

12. Examples of Process Cost ReportsFIFO Costing • Exhibit 1 • Review Problem Part 1. Good follow up exercises are SE4, SE5, SE6 and E4, E5, E6, E9 Look and listen to E8.

13. What Do You Know? Prepare Process (aka Production) Cost Report-FIFO Costing Method Try P4 Try P7

14. Homework:Problem 6