Process Costing - 1831 Words

Process Costing Vs. Job Order Costing Manufacturers use different types of costing systems to allocate production costs to their products and services. Two types of common product costing systems are process costing and job-order costing. While each system applies the same production costs to products, there are distinct variances in the application method. Process Costing o Process costing applies production costs to products based on the process they go through in the manufacturing process. Each process has a standard amount of overhead, labor and materials that are applied to each batch run the individual manufacturing processes. Reconciliations are used after batches are processed to ensure that all appropriate costs are applied to†¦show more content†¦This is sometimes called a process cost worksheet. It details out the materials and labor requirements for each item to be produced. While the products are not produced individually, the material and labor requirements for one unit are calculated based on the typical production quantity. Standard Costing o Standard costing is often used in conjunction with process costing. Standard costs are determined on an annual basis and use the material and labor requirements from the bill of material along with the standard cost per unit of material or hour of labor to determine a standard unit cost. A standard overhead cost is also calculated annually and included in the product cost. Variances o On a regular basis, the standard cost is compared with the actual costs. The difference between the standard cost and the actual cost is called the variance. There are material variances, labor variances and overhead variances. High variances need to be investigated to determine if the product cost is reasonable or if there are production problems. Explanation of Process Costing Why Use Job Order Costing o Job order costing system is used in situations where many different products are produced each period. Job order costing system is also extensively used in service industries. Hospitals, law firms, movie studios, accounting firms, advertising agencies and repair shops all use a variety of job order costing system to accumulate costs for accounting and billingShow MoreRelatedJob Order Costing And Process Costing Essay1234 Words   |  5 PagesJob-order costing and process costing are two basic types of accouting systems. Costing systems provide cost data to help managers plan, direct and motivate, control, and make decisions (Garrison). These cost systems differ from entity to entity but most are based on one of the two. The costing systems can be seen and are explained in more depth in the following companies which each have different ways in which they produce products. Biolea is a family-owned/operated company specializing in theRead MoreProcess Costing1436 Words   |  6 PagesPAPER On Process Costing Submitted in fulfillment of the requirements for the 3rd SEM MBA Management Accounting and Control Systems Submitted to: Submitted by: Prof. G V M Sharma Vandana Rajput Dept. of MBA 1PB11MBA60 INTRODUCTION: Process costing is a form of operations costing which is used where standardized homogeneous goods are produced. This costing method is usedRead MoreProcess Costing1282 Words   |  6 PagesI. Discuss Process Costing, clearly bringing out its advantages and disadvantages. DEFINITION Costs are accumulated in costing systems. According to Glautier and Underdown (2001), the development of costing systems reflects the manner in which accounting methods have been adapted to the needs of different forms of activity and technology, and also to the appearance of advanced manufacturing techniques that have been a feature of recent years. Cost accounting systems allow full product costs toRead MoreProcess Costing820 Words   |  4 PagesProcess costing Process costing is a system which mostly practices by a company whereby the manager of the company wants to know the cash flow from one department to another. Process costing give a clarify information to managers, therefore this activities is very important. Process costing is consisting of three ingredients which are direct materials, direct labor and manufacturing overhead. Direct material is the raw material which needs to produce a product, for example rubber for shoes,Read MoreProcess Costing818 Words   |  4 PagesEXERCISE 3–1: Process Costing and Job-Order Costing [LO1] Which method of determining product costs, job-order costing or process costing, would be more appropriate in each of the following situations? * a. An Elmer’s glue factory. * b. A textbook publisher such as McGraw-Hill. * c. An Exxon oil refinery. * d. A facility that makes Minute Maid frozen orange juice. * e. A Scott paper mill. * f. A custom home builder. * g. A shop that customizes vans. * h. ARead MoreCars And Process Costing System928 Words   |  4 PagesPart 1: Vans and Process Costing System In manufacture, determining unit production cost plays an important role. Through a managerial cost system, managers use cost data to plan, control, and make decisions with the goal to gain the highest profit. Managerial cost system includes two common methods: process costing and job order costing. Job order cost is used to cost specific products or group of products whereas process costing is used for the mass production of similar products. Vans, a manufacturerRead MoreThe Costing Method Is An Accounting Process1134 Words   |  5 PagesA1. Costing Method Costing Method is an accounting process that assesses itemized input costs of production and fixed costs to determine overall costs of production. (Kucera, n.d.) Competition Bikes is performing this analysis so management can determine the optimum sales units to breakeven from its San Diego plant based on the current sales mix of 9 Titanium bicycles for every 5 CarbonLite bicycles produced. Traditional costing is an easily implemented costing method that aligns with generallyRead MoreJob Order and Process Costing Systems - Quiz Essay1908 Words   |  8 Pages  1. | Question : | (TCO F) Assume there is no beginning work in process inventory and the ending work in process inventory is 100% complete with respect to materials costs. The number of equivalent units with respect to materials costs under the weighted-average method is: | |    | Student Answer: | x | the same as the number of units put into production. |    | | | less than the number of units put into production. |    | | | the same as the number of units completed. |    | | |Read MoreAc552 W3 Lecture Process Costing Quiz706 Words   |  3 PagesTop That manufactures baseball-style hats. Material is introduced at the beginning of the process in the Cutting Department. Conversion costs are incurred (and allocated) uniformly throughout the process. As the cutting of material is completed, the pieces are immediately transferred to the Sewing Department. Data for the Cutting Department for the month of February 2005 follow: Work in process, January 31-- 50,000 units 100% complete for direct materials, 40% completed for conversionRead MoreIntroduction. Muddled Is An Acfi2003 Student And As Many1398 Words   |  6 Pagesthe course including a fundamental principle, the differences in the costing systems and cost management systems. The purpose of this essay is help Muddled understand the fundamental costing principle that management systems should reflect the fact that different costs are relevant for different purposes, and how this principle affects the way that job costing and process costing systems are designed. Along the way several costing concepts will be explained and laid out for Muddled to understand in