ACCTG 231 Lecture 9 Ch. 4Outline of Current Lecture I. Similarities Between Job-Order and Process CostingII. Differences Between Job-Order and Process CostingIII. Processing DepartmentsIV. Equivalent Units of ProductionV. Equivalent Units –The Basic IdeaVI. Calculating Equivalent UnitsVII. Equivalent Units of Production (Weighted-Average Method)VIII. Treatment of Direct LaborIX. Compute and Apply CostsCurrent LectureI. Similarities Between Job-Order and Process Costing- Both systems assign material, labor, and overhead costs to products and they provide a mechanism for computing unit product costs.- Both systems use the same manufacturing accounts, including Manufacturing Overhead, Raw Materials, Work in Process, and Finished Goods.- The flow of costs through the manufacturing accounts is basically the same in both systemsII. Differences Between Job-Order and Process Costing- Is used when a single product is produced on a continuing basis of for a long period of time. Job-order costing is used when many different jobs having different production requirements are worked on each period- Systems accumulate costs by department. Job-order costing systems accumulated costs by individual jobs- Systems compute unit costs by department. Job-order costing systems compute unit costs by job on the job cost sheetIII. Processing Departments- Any unit in an organization where materials, labor, or overhead are added to the product.o The activities performed in a processing department are performed uniformly on all units of production. Furthermore, the output of a processing department must be homogeneous. Products in a process costing environment typically flow in a sequence from one department to anotherThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.IV. Equivalent Units of Production- Equivalent units are the product of the number of partially completed units and the percentage completion of those units- These partially completed units complicate the determination of a department’s output for a given period and the unit cost that should be assigned to that outputV. Equivalent Units –The Basic Idea- Two half-completed products are equivalent to one complete product- Ex: So, 10,000 units 70% complete are equivalent to 7,000 complete unitsVI. Calculating Equivalent Units- Equivalent units can be calculated two ways:o The First-In, First-Out Method –FIFO is covered in the appendixo The Weighted-Average Method –This method will be covered in the main portion of the chapterVII. Equivalent Units of Production (Weighted-Average Method)- Makes no distinction between work done in prior or current periods- Blends together units and costs from prior and current periods- Determines equivalent units of production for a department by adding together the number of units transferred out plus the equivalent units in ending Work in Process Inventory VIII. Treatment of Direct Labor- Direct labor costs may be small in comparison to other product costs in process cost systems- Direct labor and manufacturing overhead may be combined into one classification of product cost called conversion costsIX. Compute and Apply Costs- The formula for computing the cost per equivalent unit is:- Cost per equivalent unit= (((Cost of beginning Work in Process Inventory)+(Cost added during the period))/(Equivalent units of
View Full Document