New User Special Price Expires in

Let's log you in.

Sign in with Facebook


Don't have a StudySoup account? Create one here!


Create a StudySoup account

Be part of our community, it's free to join!

Sign up with Facebook


Create your account
By creating an account you agree to StudySoup's terms and conditions and privacy policy

Already have a StudySoup account? Login here

ACC212 Chapter 4 Notes

by: Tiffany Park

ACC212 Chapter 4 Notes ACC212

Marketplace > University of Miami > Accounting > ACC212 > ACC212 Chapter 4 Notes
Tiffany Park

Preview These Notes for FREE

Get a free preview of these Notes, just enter your email below.

Unlock Preview
Unlock Preview

Preview these materials now for free

Why put in your email? Get access to more of this material and other relevant free materials for your school

View Preview

About this Document

ACC212 Managerial Accounting Chapter 4 Textbook Notes
Managerial Accounting
Mario Perez
Study Guide
Accounting, business
50 ?




Popular in Managerial Accounting

Popular in Accounting

This 9 page Study Guide was uploaded by Tiffany Park on Monday February 29, 2016. The Study Guide belongs to ACC212 at University of Miami taught by Mario Perez in Spring 2016. Since its upload, it has received 35 views. For similar materials see Managerial Accounting in Accounting at University of Miami.


Reviews for ACC212 Chapter 4 Notes


Report this Material


What is Karma?


Karma is the currency of StudySoup.

You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!

Date Created: 02/29/16
Chapter 4: Process Costing  Job-order Costing and Process Costing are 2 common methods for determining unit product costs.  Job-order costing is used when many different jobs or products are worked on each period.  Process costing is used most commonly in industries that convert raw materials into homogeneous products, such as bricks, soda, or paper, on a continuous basis. o Ex. Scott Paper (paper towels), General Mills (flour), Coppertone (sunscreens) 3 Similarities between Job-Order and Process Costing  Both systems have the same basic purpose – to assign material, labor, and manufacturing overhead costs to products and to 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 systems. 3 Differences between Job-Order and Process Costing Processing Department – an organizational unit where work is performed on a product and where materials, labor, or overhead costs are added to the product. o Ex. A potato chip factory having 3 processing departments – one for preparing potatoes, one for cooking, and one for inspecting/packaging. o Some products go through a number of processing departments where some go through one or two. o Two Essential Features 1. The activity in the processing department is performed uniformly on all of the units passing through it. 2. The output of the processing department is homogeneous (identical).  Cost accumulation is simpler in a process costing system than in a job-order costing system since costs are traced to only a few processing departments. The Flow of Materials, Labor, and Overhead Costs  T-account model of materials, labor, and overhead cost flows in a processing costing system:  A separate Work-in-Process account is maintained for each processing department.  The completed production of the first processing department is transferred to the Work-in-Process account of the second processing department.  Materials, labor, and overhead costs can be added in any processing department – not just the first. Materials, Labor, and Overhead Cost Entries Material Costs  Materials are drawn from the storeroom using a materials requisition form.  Materials can be added in any processing department.  Journal entry: o Work in Process xxx Raw Materials xxx Labor Costs  In process costing, labor costs are traced to departments, not to individual jobs like in job-order costing.  Journal entry: o Work in Process xxx Salaries & Wages Payable xxx Overhead Costs  Predetermined overhead rates are usually used.  Manufacturing overhead cost is applied according to the amount of the allocation base that is incurred in the department.  Journal entry: o Work in Process xxx Manufacturing Overhead xxx Completing the Cost Flows  Once processing has been completed in a department, the units are transferred to the next.  Journal entry: o Work in Process – Dept. 1 xxx Work in Process – Dept. 2 xxx o Finished Goods xxx Work in Process – Dept. 2 xxx o Cost of Goods Sold xxx Finished Goods xxx Equivalent Units of Production – the product of the number of partially complete units and the percentage completion of those units with respect to the processing in the department. (the # of complete units that could have been obtained from the materials and effort that went into the partially complete units) Equivalent units = # of partially completed units X % completion  Ex. Ending Work-in-Process Inventory: 500 units that are 60% complete o Equivalent units = 500 X 60% = 300 fully complete units  These equivalent units are added to any units completed during the period to determine the department’s output for the period – called the equivalent units of production.  Equivalent units of production for a period can be computed in different ways: o Weighted-Average Method o FIFO Method – a method in which equivalent units and unit costs relate only to work done during the current period. Weighted-Average Method – blends together units and costs from the current period with units and costs from the prior period.  The equivalent units of production for a department are the # of units transferred to the next department (or to finished goods) + the equivalent units in the department’s ending work in process inventory.  A separate calculation is made for each cost category in each processing department. Units transferred to the next dept. or to finished goods + Equivalent units in ending work in process inventory = Equivalent units of production  Beginning Work-in-Process Inventory is ignored.  Conversion cost – direct labor cost + manufacturing overhead cost o In process costing, conversion cost is treated as a single element of product cost. Ex. Cost per Equivalent Unit – Weighted-Average Method Cost per equivalent unit = Cost of beginning work-in-process inventory + Cost added during the period Equivalent units of production Ex. Apply Costs – Weighted-Average Method Ex. Cost Reconciliation Report Ex. Operation Costing – used in situations where products have some common characteristics and some individual characteristics to determine product costs.  Hybrid system that employs aspects of both job-order and process costing.  Products are processed in batches with each batch charged for its own specific materials, like in job-order costing.  Labor and overhead costs are accumulated by operation or by department; these costs are assigned to units as in process costing.  Ex. electronic equipment, textiles, clothing, shoes, and jewelry. FIFO Method  The FIFO method of process costing differs from weighted- average method in 2 ways: o The computation of equivalent units o The way in which costs of beginning inventory are treated  Considered more accurate but more complex  “Units transferred out” is divided into two parts (units from the beginning inventory that were completed and transferred out and the other the units that were both started and completed during the current period)  Full consideration is given to the amount of work expended during the current period on units in the beginning work in process inventory as well as on units in the ending inventory  Both beginning and ending inventories are converted to an equivalent units basis  Beginning inventory: the equivalent units represent the work done to complete the units  Ending inventory: the equivalent units represent the work done to bring the units to a stage of partial completion at the end of the period (the same as with the weighted-average method) Weighted-Average Method vs. FIFO Method Cost per Equivalent – FIFO Method Applying Costs – FIFO Method  The cost of the units transferred out consists of 3 distinct components 1. The cost of beginning work in process inventory 2. The cost to complete the units in beginning work-in-process inventory 3. The cost of units started and completed during the period Cost Reconciliation Report – FIFO Method 3 Methods to Allocate Service Department Costs to other Departments 1. The Direct Method 2. The Step-Down Method 3. Reciprocal Method


Buy Material

Are you sure you want to buy this material for

50 Karma

Buy Material

BOOM! Enjoy Your Free Notes!

We've added these Notes to your profile, click here to view them now.


You're already Subscribed!

Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'

Why people love StudySoup

Steve Martinelli UC Los Angeles

"There's no way I would have passed my Organic Chemistry class this semester without the notes and study guides I got from StudySoup."

Janice Dongeun University of Washington

"I used the money I made selling my notes & study guides to pay for spring break in Olympia, Washington...which was Sweet!"

Jim McGreen Ohio University

"Knowing I can count on the Elite Notetaker in my class allows me to focus on what the professor is saying instead of just scribbling notes the whole time and falling behind."


"Their 'Elite Notetakers' are making over $1,200/month in sales by creating high quality content that helps their classmates in a time of need."

Become an Elite Notetaker and start selling your notes online!

Refund Policy


All subscriptions to StudySoup are paid in full at the time of subscribing. To change your credit card information or to cancel your subscription, go to "Edit Settings". All credit card information will be available there. If you should decide to cancel your subscription, it will continue to be valid until the next payment period, as all payments for the current period were made in advance. For special circumstances, please email


StudySoup has more than 1 million course-specific study resources to help students study smarter. If you’re having trouble finding what you’re looking for, our customer support team can help you find what you need! Feel free to contact them here:

Recurring Subscriptions: If you have canceled your recurring subscription on the day of renewal and have not downloaded any documents, you may request a refund by submitting an email to

Satisfaction Guarantee: If you’re not satisfied with your subscription, you can contact us for further help. Contact must be made within 3 business days of your subscription purchase and your refund request will be subject for review.

Please Note: Refunds can never be provided more than 30 days after the initial purchase date regardless of your activity on the site.