In this chapter, the learning objectives are: Identify the types of firms or operations for which a process costing system is most suitable, explain and calculate equivalent units produced, describe the five steps in process costing, demonstrate the weighted-average method of process costing, demonstrate the FIFO method of process costing, | Process Costing Chapter Six 6-2 Identify the types of firms or operations for which a process costing system is most suitable Explain and calculate equivalent units produced Describe the five steps in process costing Demonstrate the weighted-average method of process costing Demonstrate the FIFO method of process costing Learning Objectives 6-3 Learning Objectives (continued) Apply process costing to a firm with multiple departments Prepare journal entries to record the flow of costs in a process cost system Explain how process cost systems are implemented and enhanced in practice Account for spoilage in process costing 6-4 Process Costing Process costing: a product costing system that accumulates costs according to processes or departments Accumulated costs are spread over output of the period Used when outputs are standardized/ homogeneous Examples: chemicals, oil refining, textiles, paints, flour, canneries, rubber, steel, glass, cement, and sporting goods 6-5 Production Cost Report Prepared each period (., each month) for each department Each department has its own WIP Inventory account The production cost report summarizes: The number of physical and equivalent units Costs incurred during the period Cost per equivalent unit for each cost element (direct materials, direct labor, and factory overhead) Costs assigned to units completed and to units in ending work-in-process inventory 6-6 Production Cost Report (continued) Equivalent units: A measure of output for the period Example: 2 units 50% complete are “equivalent” to 1 unit fully complete An expression of partially completed units in terms of fully completed units Cost per equivalent unit = costs in each department for the period divided by the number of equivalent units produced during the period Definition of numerator and denominator depends on whether FIFO or weighted-average method is used 7 Some Important Process Cost Issues Because of the relatively small direct labor content in many process . | Process Costing Chapter Six 6-2 Identify the types of firms or operations for which a process costing system is most suitable Explain and calculate equivalent units produced Describe the five steps in process costing Demonstrate the weighted-average method of process costing Demonstrate the FIFO method of process costing Learning Objectives 6-3 Learning Objectives (continued) Apply process costing to a firm with multiple departments Prepare journal entries to record the flow of costs in a process cost system Explain how process cost systems are implemented and enhanced in practice Account for spoilage in process costing 6-4 Process Costing Process costing: a product costing system that accumulates costs according to processes or departments Accumulated costs are spread over output of the period Used when outputs are standardized/ homogeneous Examples: chemicals, oil refining, textiles, paints, flour, canneries, rubber, steel, glass, cement, and sporting goods 6-5 Production Cost .
