Process Costing
Process Costing
Characteristics of Process Manufacturing
• Since each product within a product line passing through the processes would receive similar ‘‘doses’’ of materials, labor, and overhead, costs are accumulated by
process.
• Process costing works well whenever relatively homogeneous products pass through a series of processes and receive similar amounts of manufacturing costs
Units are homogeneous and subjected to the same operations for a given process and each unit produced in a period should receive the same unit cost.
How Costs Flow through the Accounts in Process Costing
• In process costing, each producing department has its own WIP account. As goods are completed in one department, they are transferred to the next department. • The costs attached to the goods transferred out are also transferred to the next department.
Calculating Cost Flows without Work in Process
Information:
Suppose that Healthblend decides to produce 2,000 bottles of multivitamins with the following costs
(there is no beginning or ending work-in-process for each department):
Required:
1. Calculate the costs transferred out of each department.
Solution:
TRUE/FALSE
1. Process costing accumulates costs by individual jobs.
2. Process costing is most appropriate for manufacturers of homogeneous products.
3. Process costing is most useful in situations when relatively homogeneous products are produced.
4. Large manufacturing plants, such as chemical, food, and tire manufacturers, use process costing.
Any product or service that is basically homogeneous and petitively produced can take advantage of a process-costing pproach. TRUE/FALSE
6. Process-costing systems are specifically designed to support costing of massproduced homogeneous products.
7.
The costs transferred from a prior process to a subsequent process are referred to as transferred-in costs.
MULTIPLE CHOICE
Which type of costing system works best with a large number of homogeneous products?
a.
b.
c.
Characteristics of Process Manufacturing
• Since each product within a product line passing through the processes would receive similar ‘‘doses’’ of materials, labor, and overhead, costs are accumulated by
process.
• Process costing works well whenever relatively homogeneous products pass through a series of processes and receive similar amounts of manufacturing costs
Units are homogeneous and subjected to the same operations for a given process and each unit produced in a period should receive the same unit cost.
How Costs Flow through the Accounts in Process Costing
• In process costing, each producing department has its own WIP account. As goods are completed in one department, they are transferred to the next department. • The costs attached to the goods transferred out are also transferred to the next department.
Calculating Cost Flows without Work in Process
Information:
Suppose that Healthblend decides to produce 2,000 bottles of multivitamins with the following costs
(there is no beginning or ending work-in-process for each department):
Required:
1. Calculate the costs transferred out of each department.
Solution:
TRUE/FALSE
1. Process costing accumulates costs by individual jobs.
2. Process costing is most appropriate for manufacturers of homogeneous products.
3. Process costing is most useful in situations when relatively homogeneous products are produced.
4. Large manufacturing plants, such as chemical, food, and tire manufacturers, use process costing.
Any product or service that is basically homogeneous and petitively produced can take advantage of a process-costing pproach. TRUE/FALSE
6. Process-costing systems are specifically designed to support costing of massproduced homogeneous products.
7.
The costs transferred from a prior process to a subsequent process are referred to as transferred-in costs.
MULTIPLE CHOICE
Which type of costing system works best with a large number of homogeneous products?
a.
b.
c.