Chapter 4: Process costing. Managers need to assign costs to products to facilitate external financial reporting and internal decision making. This chapter illustrates an absorption costing approach to calculating product costs known as process costing. | Chapter 04 Process Costing Chapter 4: Process Costing Managers need to assign costs to products to facilitate external financial reporting and internal decision making. This chapter illustrates an absorption costing approach to calculating product costs known as process costing. Processing Departments Any unit in an organization where materials, labor, or overhead are added to the product. The activities performed in a processing department are performed uniformly on all units of production. Furthermore, the output of a processing department must be homogeneous. Products in a process costing environment typically flow in a sequence from one department to another. A processing department is any unit in an organization where materials, labor, or overhead are added to the product. The output from a processing department is homogeneous, that is, they all appear the same (homogeneous output). Products in a process costing environment typically flow in a sequence from one department to another. Comparing Job-Order and Process Costing Finished Goods Cost of Goods Sold Direct Labor Manufacturing Overhead Processing Department Costs are traced and applied to departments in a process cost system. Direct Materials In a process costing system, costs are traced to departments that process the goods. In some companies there may be several processing departments that goods must pass through to become finished goods. A separate Work in Process account is maintained for each processing department. Material, labor, and overhead costs transferred from one department’s Work in Process account to another department’s Work in Process account are called transferred-in costs. Raw Materials Process Cost Flows: The Flow of Raw Materials (in T-account form) Work in Process Department B Work in Process Department A Direct Materials Direct Materials Direct Materials Direct materials can be requisitioned for use in both Department A and Department B. These direct materials are likely to . | Chapter 04 Process Costing Chapter 4: Process Costing Managers need to assign costs to products to facilitate external financial reporting and internal decision making. This chapter illustrates an absorption costing approach to calculating product costs known as process costing. Processing Departments Any unit in an organization where materials, labor, or overhead are added to the product. The activities performed in a processing department are performed uniformly on all units of production. Furthermore, the output of a processing department must be homogeneous. Products in a process costing environment typically flow in a sequence from one department to another. A processing department is any unit in an organization where materials, labor, or overhead are added to the product. The output from a processing department is homogeneous, that is, they all appear the same (homogeneous output). Products in a process costing environment typically flow in a sequence from one department to .
