Accounting Principles 8th Edition - MCCC

[Pages:74]Page 3-1

Process Costing

Managerial Accounting Fifth Edition

Weygandt Kimmel Kieso

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study objectives

1. Understand who uses process cost systems. 2. Explain the similarities and differences between job

order cost and process cost systems. 3. Explain the flow of costs in a process cost system. 4. Make the journal entries to assign manufacturing costs in

a process cost system. 5. Compute equivalent units. 6. Explain the four steps necessary to prepare a production

cost report. 7. Prepare a production cost report.

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preview of chapter 3

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Nature of Process Cost Systems

Uses of Process Cost Systems

Use to apply costs to similar products that are mass-produced in a continuous fashion

Examples include the production of Cereal, Paint, and Soft Drinks

Illustration 3-1

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SO 1 Understand who uses process cost systems.

Nature of Process Cost Systems

Process and Job Cost Comparison

Illustration 3-2

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SO 1 Understand who uses process cost systems.

Nature of Process Cost Systems

Review Question

Which of the following items is not a characteristic of a

process cost system:

a. Once production begins, it continues until the finished product emerges.

b. The focus is on continually producing homogenous products.

c. When the finished product emerges, all units have precisely the same amount of materials, labor, and overhead.

d. The products produced are heterogeneous in nature.

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Solution on notes page

SO 1 Understand who uses process cost systems.

Nature of Process Cost Systems

Process Costing for Service Companies

Service companies that provide specific, nonroutine services will probably benefit from using a job order cost system. Those that perform routine, repetitive services will probably be better off with a process cost system.

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SO 1 Understand who uses process cost systems.

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