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Managerial Accounting

by: Anna Notetaker

Managerial Accounting ACCT

Marketplace > Middle Tennessee State University > ACCT > Managerial Accounting
Anna Notetaker
GPA 3.62

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Part of Chapter 4
Managerial Accounting
Monica Davis
Class Notes
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This 2 page Class Notes was uploaded by Anna Notetaker on Thursday September 8, 2016. The Class Notes belongs to ACCT at Middle Tennessee State University taught by Monica Davis in Fall 2016. Since its upload, it has received 14 views.


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Date Created: 09/08/16
CH4 ­ Process Costing  Job­Order Costing – used when many different jobs or products are worked on each period  Process Costing – used in industries that convert raw materials into Homogeneous  (uniform) products on a continuous basis o i.e., process costing is used when a company produces a continuous flow of units that  are indistinguishable from one another  examples: paper towels, soda o Process costing is also used in companies with assembly operations.  Differences between Job­order Costing and Process Costing: o The type of processing used and the type of product produced, as discussed above o With process costing, it’s not possible to trace specific materials, labor, OR overhead  costs to a particular customer order (job), because each order is filled from a continuous  flow of identical units.  So instead of accumulating costs by job, costs are accumulated by department for a  given period. o Process costing uniformly applies the 3 product costs to all units that pass through the  department during a period, rather than by job as Job­order costing does.  Read Intro story on pg144  Process Department – a step in the total processing of a product o An organizational  unit where work is performed on the product and direct material,  direct labor, and overhead costs are added to the product  o example on pg146 o 2 essential features: 1) the department’s process is performed uniformly on all units passing through the  department 2) the output of the department is homogeneous: all of the units produced are identical o may have only one or two processing departments, or several o all products typically flow through the departments in a sequence o Process Costing Flowchart: o Note that direct material, direct labor, and overhead cost can be added in any  processing department’s Work­in­Process  inventory account, and then passed on to the next department’s Work­in­Process inventory account and finally on to the Finished  Goods inventory account.  Equivalent Units: o After costs are accumulated in a given department, the number of units produced must  be determined  o However, what if the department ends the period with incomplete units?  These partially complete units must be translated into whole units, or equivalent  units,’ using this formula: Equival. units in ending WIP Inv. =  # of partially completed units  x  %  completion  It’s as though we are calculating the number of whole units that could have been  produced from the material and effort that went into the partially completed units.


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