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Job Cost
Factory
Direct
Direct
Factory overhead
Direct
Direct labor
materials
overhead
labor
materials Sheets
Dept. A and
Dept. B
Comparing
Comparing Job
Job Order
Order
Costing
Costing and
and Process
Process Costing
Costing
Process Cost System
Work in Process Work in Process
Account Account
Direct to
to Finished
Finished
DEPT. A DEPT. B
materials Goods
Goods
Factory
Direct Factory
Direct
Overhead
Labor Overhead
Labor
Comparing
Comparing Job
Job Order
Order
Costing
Costing and
and Process
Process Costing
Costing
Both systems:
determine a product cost by measuring the
amount of direct materials and direct labor used
and allocating overhead costs.
allocate overhead using a predetermined
overhead rate (or activity-based costing).
maintain perpetual inventory records with
subsidiary ledgers for Materials, Work in
Process, and Finished Goods.
Physical
Physical Flows
Flows for
for aa Process
Process Manufacturer
Manufacturer
Scrap
Metal
Materials
Melting Casting
Department Department
Physical
Physical Flows
Flows for
for aa Process
Process Manufacturer
Manufacturer
Molten
metal
transferred
from
Melting
Melting Casting
Department Department
To finished goods
Cost Flows for a Process Manufacturer
Materials WIP – Melting WIP – Casting
Purchases of DM DM
direct and
indirect
materials
Actual
costs
incurred
Cost of Goods Sold
Actual Actual
costs costs
incurred incurred
Cost of Goods Sold
Step 2: Calculate
equivalent
units of
production
Step 2: Calculate Equivalent Units of Production
EU of
500 materials
600 tons started and completed
Inventory in
EU of
process, July 31 400 materials
100% materials added in July
Step 2: Calculate Equivalent Units of Production
Equivalent Units
Units
Whole Direct
Units Materials Conversion
Units charged to production:
Inventory in process, July 1 500
Received from materials 1,000
Total units accounted for 1,500
Units to be assigned cost:
Inventory in process, July 1
(70% complete) 500 0 150
Started and completed in July 600 600 600
Transferred to Casting Dept. 1,100 600 750
Inventory in process, July 31
(25% complete) 400 400 100
Total units to be assigned cost 1,500 1,000 850
Step 1 Step 2
Cost of Production Report—Melting Department
Costs
Costs
Direct Materials Conversion Total Costs
Unit costs:
Total costs for July in
Melting Department $50,000 $9,690
Total equivalent units
(from Slide 43) ÷ 1,000 ÷ 850
Cost per equivalent unit $ 50.00 $11.40
Step 3
Cost of Production Report—Melting Department
The
The End
End