ch03 Process Costing Ke toan quan tri

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3-1


Process
Process Costing
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.
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Prepare a production cost report.


preview of chapter 3

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Nature
Nature of
of Process
Process Cost
Cost Systems

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
Nature of
of Process
Process Cost
Cost Systems
Systems
Process and Job Cost
Comparison

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Illustration 3-2

SO 1 Understand who uses process cost systems

Nature
Nature of
of Process
Process Cost
Cost Systems
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
Nature of
of Process
Process Cost
Cost Systems
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


Nature
Nature of
of Process
Process Cost

Cost Systems
Systems
Similarities and Differences Between
Job Order Cost and Process Cost
Systems
Process Cost

Job Order Cost

Costs assigned to each
job.

Products have unique
characteristics.

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Costs tracked through a
series of connected
manufacturing processes or
departments.
Products are uniform or
relatively homogeneous
and produced in a large
volume.

SO 2 Explain the similarities and differences
between job order cost and process cost

Nature
Nature of
of Process
Process Cost
Cost Systems
Systems
Similarities and Differences
Illustration 3-3

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3-10

SO 2 Explain the similarities and differences
between job order cost and process cost


Nature
Nature of
of Process
Process Cost
Cost Systems
Systems
Similarities

Differences

1. The manufacturing
cost elements.
2. The accumulation of

the costs of
materials, labor, and
overhead.
3. The flow of costs.

1. The number of work
in process accounts
used.
2. Documents used to
track costs.
3. The point at which
costs are totaled.
4. Unit cost
computations.

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SO 2 Explain the similarities and differences
between job order cost and process cost


Nature
Nature of
of Process
Process Cost
Cost Systems
Systems
Similarities and Differences
Illustration 3-4

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SO 2 Explain the similarities and differences
between job order cost and process cost


Nature
Nature of
of Process
Process Cost
Cost Systems
Systems

Review Question
Indicate which of the following statements is not correct:

a. Both a job order and a process cost system track the
same three manufacturing cost elements – direct
materials, direct labor, and manufacturing overhead.

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b.

In a job order cost system, only one work in process
account is used, whereas in a process cost system,
multiple work in process accounts are used.

c.

Manufacturing costs are accumulated the same way in a
job order and in a process cost system.

d.

Manufacturing costs are assigned the same way in a job
order and in a process cost system.
Solution on
notes page

SO 2 Explain the similarities and differences
between job order cost and process cost


Nature
Nature of
of Process
Process Cost
Cost Systems
Systems
Indicate whether the following
statements are true or false.
False
True
False
False
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1. A law firm is likely to use process costing for
major lawsuits.
2. A manufacturer of paintballs is likely to use
process costing.
3. Both job order and process costing determine
total costs at the end of a period of time.
4. Process costing does not keep track of
manufacturing overhead.
Solution on
notes page

SO 2 Explain the similarities and differences
between job order cost and process cost


Nature
Nature of
of Process
Process Cost
Cost Systems
Systems
Process Cost Flow
Tyler Company manufactures automatic can openers that it
sells to retail outlets. Manufacturing consists of two
processes: machining and assembly. The Machining
Department shapes, hones, and drills the raw materials.
The Assembly Department assembles and packages the
parts.

Illustration 3-5

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SO 3 Explain the flow of costs in a process cost system


Nature
Nature of
of Process
Process Cost
Cost Systems
Systems
Assigning Manufacturing
Costs

Accumulation of materials, labor, and overhead
costs is same as in job order costing.


Debit Raw Materials Inventory for purchases of
raw materials.



Debit Factory Labor for factory labor
incurred.



Debit Manufacturing Overhead for overhead
cost incurred.

Assignment of the three manufacturing cost
elements to Work in Process is different.
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SO 4 Make the journal entries to assign
manufacturing costs in a process cost system.


Nature
Nature of
of Process
Process Cost
Cost Systems
Systems
Material Costs
A process cost system requires fewer material
requisition slips than a job order cost system.
 Materials are used for processes and not
specific jobs
 Requisitions are for larger quantities of
materials
Journal entry to record materials used:

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SO 4 Make the journal entries to assign
manufacturing costs in a process cost system.


Nature
Nature of
of Process
Process Cost
Cost Systems
Systems
Factory Labor Costs
Time tickets may be used in both systems.
All labor costs incurred within a production
department are a cost of processing.
The journal entry to record factory labor costs:

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SO 4 Make the journal entries to assign
manufacturing costs in a process cost system.


Nature
Nature of
of Process
Process Cost
Cost Systems
Systems

Manufacturing Overhead
Costs
Objective of assigning overhead.


Allocate overhead to departments on an objective
and equitable basis.

Use the activity that “drives” or causes the costs.
Machine time used - primary driver.
Journal entry to allocate overhead:

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SO 4 Make the journal entries to assign
manufacturing costs in a process cost system.


Nature
Nature of
of Process
Process Cost
Cost Systems
Systems
Transfer Costs
Monthly Entry to transfer goods to next department:

Entry to transfer completed goods to Finished Goods:

Entry to record Cost of Goods sold at the time of sale:

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SO 4 Make the journal entries to assign
manufacturing costs in a process cost system.


Nature
Nature of
of Process
Process Cost
Cost Systems
Systems

Review Question
In making the journal entry to assign raw
materials costs:
a. The debit is to Finished goods Inventory.
b. The debit is often to two or more work in
process accounts.
c. The credit is generally to two or more
work in process accounts.
d. The credit is to Finished Goods Inventory.
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Solution on
notes page

SO 4 Make the journal entries to assign
manufacturing costs in a process cost system.


Nature
Nature of
of Process
Process Cost
Cost Systems
Systems
K Christel Company manufactures ZEBO
through two processes: blending and
bottling. In June, raw materials used were Blending
$18,000 and Bottling $4,000. Factory labor costs were
Blending $12,000 and Bottling $5,000. Manufacturing
overhead costs were Blending $6,000 and Bottling
$2,500. The company transfers units completed at a
cost of $19,000 in the Blending Department to the
Bottling Department. The Bottling Department transfers
units completed at a cost of $11,000 to Finished Goods.
Journalize the assignment of these costs to the two
processes and the transfer of units as appropriate.
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SO 4 Make the journal entries to assign
manufacturing costs in a process cost system.

Nature
Nature of
of Process
Process Cost
Cost Systems
Systems
to

Journalize the assignment of these costs
the two processes.

To Record Materials
Used:
Work in Process—Blending
Work in Process—Bottling

18,000
4,000

Raw Materials Inventory

22,000

To Assign Factory Labor to Production:
Work in Process—Blending
Work in Process—Bottling
Factory Labor
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12,000
5,000
17,000
SO 4


Nature
Nature of
of Process
Process Cost
Cost Systems
Systems
to

Journalize the assignment of these costs
the two processes.

To Assign Overhead to Production:
Work in Process—Blending

6,000

Work in Process—Bottling

2,500

Manufacturing Overhead

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8,500

SO 4 Make the journal entries to assign
manufacturing costs in a process cost system.


Nature
Nature of
of Process
Process Cost
Cost Systems
Systems
Journalize the transfer of units as
appropriate.
To Record Transfer of Units to the Bottling
Department:
Work in Process—Bottling
19,000
Work in Process—Blending

19,000

To Record Transfer of Units to Finished Goods:
Finished Goods Inventory
Work in Process—Bottling

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11,000
11,000

SO 4 Make the journal entries to assign
manufacturing costs in a process cost system.