Chapter 6 - Process costing. In this chapter students will be able to: Assign costs to mass-produced products using equivalent units to the production process, apply and compare FIFO and the weighted average methods in process costing, apply alternative methods in mass production for multiple departments, . | Lecture Cost management Measuring monitoring and motivating performance 3rd edition Chapter 6 COST MANAGEMENT Measuring Monitoring and Motivating Performance Third Canadian Edition ELDENBURG WOLCOTT CHEN COOK Chapter 6 Process Costing Learning Objectives LO1 Assign costs to mass-produced products using equivalent units to the production process LO2 Apply and compare FIFO and the weighted average methods in process costing LO3 Apply alternative methods in mass production for multiple departments LO4 Describe how spoilage costs are handled in process costing LO5 Explain how process costing information affects managers incentives and decisions LO1 Assign costs to mass-produced products using equivalent units to the production process Introduction to Process Costing Process costing is a method of assigning product costs to mass-produced products. This is necessary to determine the cost of the units transferred out of a department as well as the cost of the department s ending WIP inventory. WIP Inventory - Units BI Units completed This Units started amp transferred out information is Unlike job all known EI costing WIP Inventory - there are no job cost BI Units completed records to DM amp transferred out give us this CC information EI Assigning Direct Materials and Conversion Costs In process costing all costs are first assigned to departments. Costs are then allocated from departments to individual product units. Conversion costs are direct labour and production overhead costs. Process Costing with all Units Completed Riker Co. had June costs for Department 1 as follows DM 60 000 CC 30 000 90 000 There were no units in beginning or ending WIP inventory in June. During June Department 1 started 45 000 units and all 45 000 were completed in June. What is the manufacturing cost unit WIP Inventory - Units WIP Inventory - 0 0 45 000 45 000 90 000 90 000 0 0 The manufacturing cost unit is 90 000 45 000 units 2 unit. Process Costing with Some Units Completed WIP Inventory
