C1: Explain process operations and the way they differ from job order operations.
C2: Define and compute equivalent units and explain their use in process cost accounting.
C3: Define and prepare a process cost summary and describe its purposes.
C4: Appendix: Explain and illustrate the accounting for production activity using FIFO.
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Financial and Managerial AccountingWild, Shaw, and ChiappettaFourth Edition McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.Chapter 16Process Costing and AnalysisConceptual Learning ObjectivesC1: Explain process operations and the way they differ from job order operations.C2: Define and compute equivalent units and explain their use in process cost accounting.C3: Define and prepare a process cost summary and describe its purposes.C4: Appendix: Explain and illustrate the accounting for production activity using FIFO.16-*A1: Compare process cost accounting and job order cost accounting.A2: Explain and illustrate a hybrid costing system.Analytical Learning Objectives16-*P1: Record the flow of direct materials costs in process cost accounting. P2: Record the flow of direct labor costs in process cost accounting.P3: Record the flow of factory overhead costs in process cost accounting.P4: Record the transfer of completed goods to Finished Goods Inventory and Cost of Goods Sold. Procedural Learning Objectives16-* Used for production of small, identical, low-cost items. Mass produced in automated continuous production process. Costs cannot be directly traced to each unit of product.Process Manufacturing OperationsC116-*Job Order SystemsCustom ordersHeterogeneous productsLow production volumeHigh product flexibilityLow to medium standardizationProcess SystemsRepetitive operationsHomogeneous productsHigh production volume Low product flexibilityHigh standardizationComparing Job Order and Process ProductionExh. 20-2A116-*Same objective: to determine the cost of productsSame inventory accounts: raw materials, work in process, and finished goodsSame overhead assignment method:predetermined rate times actual activityJob and Process Costing SimilaritiesA116-*Job and Process Costing Similarities and DifferencesA1Journal entries for both job order and process costing are the identicalThe difference between job order and process costing lies in how the cost of goods transferred to finished goods is determined.16-*A1Job Order and Process Costing Differences Job order costingThe cost of goods transferred to finished goods is equal to the sum of all of the completed jobs for that period Process costingThe cost of goods transferred to finished goods equals the number of completed units times the cost per equivalent unit16-* Equivalent units is a concept expressing a number of partially completed units as a smaller number of fully completed units.Two one-half full pitchers are equivalent to one full pitcher.+=Equivalent Units of ProductionC216-*GenX uses a weighted average cost flow system with the following steps:Determine the physical flow of units.Compute equivalent units of production.Compute the cost per equivalent unit.Assign and reconcile costs.Accounting for GenXC316-*ProcessCostSummaryProcess Cost SummaryHelps managerscontrol theirdepartments.Provides costinformation forfinancial statements.Shows the flowof units and coststhrough work inprocess.Helps factorymanagers evaluatedepartment managerperformance.C316-*End of Chapter 1616-*