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Who Uses
Process Systems?
Job Order Cost/
Process Cost
Systems
Flow of Costs in
Process Systems
Assigning
Manufacturing
Costs in Process
Equivalent Units
Production Cost
Report
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3-1
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Managerial Accounting
Second Edition
Weygandt / Kieso / Kimmel
Process Cost Accounting
Who Uses
Process Systems?
Job Order Cost/
Process Cost
Systems
Flow of Costs in
Process Systems
Assigning
Manufacturing
Costs in Process
Equivalent Units
Production Cost
Report
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Job Order Cost System
Who Uses
Process Systems?
Job Order Cost/
Process Cost
Systems
Flow of Costs in
Process Systems
Assigning
Manufacturing
Costs in Process
Equivalent Units
Production Cost
Report
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Cost are assigned to each job;
used where finished products
can be individually identified
Illustration 3-1
Who Uses
Process Systems?
Job Order Cost/
Process Cost
Systems
Flow of Costs in
Process Systems
Assigning
Manufacturing
Costs in Process
Equivalent Units
Production Cost
Report
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Process Cost Systems
An accounting system used to
apply costs:
To similar products
That are mass-produced
In a continuous fashion
Illustration 3-2
Illustration 3-2
Who Uses
Process Systems?
Job Order Cost/
Process Cost
Systems
Flow of Costs in
Process Systems
Assigning
Manufacturing
Costs in Process
Equivalent Units
Production Cost
Report
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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
Illustration 3-3
Illustration 3-4
Job Order versus Process Cost System
Illustration 3-5
Job Order versus Process Cost System
Accumulating Manufacturing CostsSame As In Job Order
From Chapter 2
Date
Jan. 4
Date
Jan. 31
Date
Jan. 31
Account Titles and Explanation
(1)
Raw Materials Inventory
Accounts Payable
(Purchase of raw materials on account)
Account Titles and Explanation
(2)
Factory Labor
Factory Wages Payable
Employer Payroll Taxes Payable
(To record factory labor costs)
Account Titles and Explanation
(3)
Manufacturing Overhead
Utilities Payable
Prepaid Insurance
Accounts Payable - for repairs
Accumulated Depreciation
Property Taxes Payable
(To record overhead costs)
Debit
42,000
Debit
Credit
42,000
Credit
32,000
27,000
5,000
Debit
13,800
Credit
4,800
2,000
2,600
3,000
1,400
Assigning Material Costs
Who Uses
Process Systems?
Job Order Cost/
Process Cost
Systems
Flow of Costs in
Process Systems
Assigning
Manufacturing
Costs in Process
Equivalent Units
Production Cost
Report
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• 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.
Assigning Direct Labor
Who Uses
Process Systems?
Job Order Cost/
Process Cost
Systems
Flow of Costs in
Process Systems
Assigning
Manufacturing
Costs in Process
Equivalent Units
Production Cost
Report
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Labor cost per process obtained
from payroll register or
departmental payroll
summaries.
Assigning Manufacturing Overhead
Who Uses
Process Systems?
Job Order Cost/
Process Cost
Systems
Flow of Costs in
Process Systems
Assigning
Manufacturing
Costs in Process
Equivalent Units
Production Cost
Report
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• Objective in assigning
manufacturing overhead to
departments is to allocate on
objective and equitable basis.
Assigning Manufacturing Costs
Date
Jan. 31
Date
Jan. 31
Date
Jan. 31
Account Titles and Explanation
Work in Process -Machining
Work In Process - Assembly
Raw Materials Inventory
(To record materials used)
Account Titles and Explanation
Work in Process -Machining
Work in Process-Assembling
Factory Labor
(To assign factory labor to job)
Account Titles and Explanation
Work in Process-Assembly
Work in Process -Machining
Manufacturing Overhead
(To assign overhead to production)
Debit
Credit
xxxx
xxxx
xxxx
Debit
Credit
xxxx
xxxx
xxxx
Debit
Credit
xxxx
xxxx
xxxx
Transfer to Next Department
Who Uses
Process Systems?
Job Order Cost/
Process Cost
Systems
Flow of Costs in
Process Systems
Assigning
Manufacturing
Costs in Process
Equivalent Units
Production Cost
Report
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At the end of period an entry is
needed to record the cost of
goods transferred out of the
department.
Transfer to Next Department
Date
Account Titles and Explanation
Work in Process -Assembly
Work In Process - Machining
(To record transfer of units to Assembly Department)
Debit
Credit
xxxx
xxxx
Transfer to Finished Goods
Date
Account Titles and Explanation
Finished Goods Inventory
Work In Process - Assembling
(To record transfer of units to Finished Goods)
Debit
Credit
xxxx
xxxx
Transfer to Cost of Goods Sold
Date
Account Titles and Explanation
Cost of Goods Sold
Finished Goods Inventory
(To record cost of units sold )
Debit
Credit
xxxx
xxxx
Illustration 3-7
Equivalent Units of Production
Who Uses
Process Systems?
Job Order Cost/
Process Cost
Systems
Flow of Costs in
Process Systems
Assigning
Manufacturing
Costs in Process
Equivalent Units
Production Cost
Report
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A measure of the work done
during the period, expressed
in fully completed units.
Weighted-average Method
Who Uses
Process Systems?
Job Order Cost/
Process Cost
Systems
Flow of Costs in
Process Systems
Assigning
Manufacturing
Costs in Process
Equivalent Units
Production Cost
Report
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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.
Conversion Costs
Who Uses
Process Systems?
Job Order Cost/
Process Cost
Systems
Flow of Costs in
Process Systems
Assigning
Manufacturing
Costs in Process
Equivalent Units
Production Cost
Report
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The sum of labor costs and
overhead costs.
Production Cost Report
Who Uses
Process Systems?
Job Order Cost/
Process Cost
Systems
Flow of Costs in
Process Systems
Assigning
Manufacturing
Costs in Process
Equivalent Units
Production Cost
Report
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An internal report for
management that shows
both production quantity
and cost data for a
production department.
Illustration 3-12
Production Cost Report
Who Uses
Process Systems?
Job Order Cost/
Process Cost
Systems
Flow of Costs in
Process Systems
Assigning
Manufacturing
Costs in Process
Equivalent Units
Production Cost
Report
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Physical Units
Who Uses
Process Systems?
Job Order Cost/
Process Cost
Systems
Flow of Costs in
Process Systems
Assigning
Manufacturing
Costs in Process
Equivalent Units
Production Cost
Report
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Actual units to be accounted
for during a period,
irrespective of any work
performed.
Who Uses
Process Systems?
Job Order Cost/
Process Cost
Systems
Flow of Costs in
Process Systems
Assigning
Manufacturing
Costs in Process
Equivalent Units
Production Cost
Report
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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.
Total Units (costs) Accounted for
Who Uses
Process Systems?
Job Order Cost/
Process Cost
Systems
Flow of Costs in
Process Systems
Assigning
Manufacturing
Costs in Process
Equivalent Units
Production Cost
Report
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The sum of the units (costs)
transferred out during the
period plus the units (costs)
in process at the end of the
period.
Unit Production Costs
Who Uses
Process Systems?
Job Order Cost/
Process Cost
Systems
Flow of Costs in
Process Systems
Assigning
Manufacturing
Costs in Process
Equivalent Units
Production Cost
Report
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Costs expressed in terms of
equivalent units of
production.
Unit Materials Cost Computation
Who Uses
Process Systems?
Job Order Cost/
Process Cost
Systems
Flow of Costs in
Process Systems
Assigning
Manufacturing
Costs in Process
Equivalent Units
Production Cost
Report
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Cost Reconciliation Schedule
Who Uses
Process Systems?
Job Order Cost/
Process Cost
Systems
Flow of Costs in
Process Systems
Assigning
Manufacturing
Costs in Process
Equivalent Units
Production Cost
Report
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A schedule that shows that
the total costs accounted
for equal the total costs to
be accounted for.
Mixing Department
Cost Reconciliation Schedule
Illustration 3-22
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) 30,000 130,000
Total Costs
$655,000
Mixing Department
Production Cost Report
For the Month Ended June 30, 2002
Illustration 3-23
Equivale nt Units
Phys ical
Conve r s ion
Units
QUANTITIES
M ate r ials
Ste p 1
Cos ts
Ste p 2
Units to be accounte d for
Wor k in pr oce s s , June 1
100,000
Star te d into pr oduction
800,000
Total units
900,000
Units accounte d for
Tr ans fe r r e d out
700,000
700,000
700,000
Wor k in pr oce s s , June 30
200,000
200,000
120,000
900,000
900,000
820,000
Total units
COSTS
Unit cos ts
(200,000 x 60%)
Conve r s ion
Ste p 3
M ate r ials
Cos ts in June
(a)
Equivale nt units
(b)
Unit cos ts [(a)/(b)]
$
450,000
Cos ts
$
900,000
$
0.50
205,000
Total
$ 655,000
820,000
$
0.25
$
0.75
Cos ts to be accounte d for
Wor k in pr oce s s , June 1
$
Star te d into pr oduction
Total cos ts
Cos t Re conciliation Sche dule
85,000
570,000
$ 655,000
Ste p 4
Cos ts accounte d for
Tr ans fe r r e d out (700,000 x $0.75)
$ 525,000
Wor k in pr oce s s , June 30
M ate r ials (200,000 x $0.50)
Conve r s ion cos ts (120,000 x $0.25)
Total Cos ts
$
100,000
30,000
130,000
$ 655,000
Operations Costing
Who Uses
Process Systems?
Job Order Cost/
Process Cost
Systems
Flow of Costs in
Process Systems
Assigning
Manufacturing
Costs in Process
Equivalent Units
Production Cost
Report
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A combination of a process cost
and a job order cost system,
in which products are
manufactured primarily by
standardized methods, with
some customization.
Who Uses
Process Systems?
Job Order Cost/
Process Cost
Copyright
Systems
COPYRIGHT
© 2002, John Wiley & Sons, Inc. All rights reserved.
or translation of this work beyond that permitted in
FlowReproduction
of Costs in
Process
Systems117 of the 1976 United States Copyright Act without the
Section
Assigning
express written permission of the copyright owner is unlawful.
Manufacturing
Request
Costs
in Process for further information should be addressed to the
Permissions
Department, John Wiley & Sons, Inc. The purchaser
Equivalent
Units
may make
back-up copies for his/her own use only and not for
Production
Cost
Report
distribution or resale. The Publisher assumes no responsibility
for errors, omissions, or damages, caused by the use of these
programs or from the use of the information contained herein.
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