Managerial Accounting

Chapter 4

Job-order Costing vs. Process Costing Similarities

Same basic purpose exists Use same basic manufacturing accounts Flow of costs are basically the same

Differences The flow of goods in the process costing situation

are essentially indistinguishable and continuous through the manufacturing process.

Costs are accumulated by department, rather than by individual job.

Use a department production report rather than a job-cost sheet.

Process costing methods Only 2 are covered in text

Weighted average FIFO

Equivalent Units of Product Equivalent units in the ending work

in process inventory = Number of partially completed units x % complete

Weighted Average method Equivalent units of product = Units

transferred to next department or to finished goods + Equivalent units in the ending work in process inventory

Production Report Purpose – summarize all of the activity

that takes place in a department’s work in process.

Consists of three parts: Quantity schedule and computation of

equivalent units Computation of costs per equivalent unit Reconciliation of all cost flows into and out

of the department