Chapter 6 Cost Accounting – Flashcards

a product costing system that accumulates costs according to processes or departments

Used when outputs are standardized/ homogeneous

Is prepared each period (e.g., each month) for each department

Each Department has its own WIP Inventory account.

- the number of Physical and equivalent units - Costs incurred during the period - Cost per equivalent unit for each cost element ( e.g., DL, DM, Factory overhead) - Cost assigned to units completed and units in ending WIP inventory

For the measure of output for the period. Example: 2 units 50% complete = 1 unit fully complete

Costs in each department for the period divided by the " number of equivalent units" produced during the period

Chemical company, Oil Refining, Textiles, paints, flour, canneries, rubber, steel, glass,cement and sporting goods.

Homogeneous products

Both cost incurred during the current period and cost incurred in the prior period that are showed as the beginning work-in-process inventory of the current period.

cost incurred and work performed during the current period.

A company that should use a process costing system typically has homogenous products, which pass through a series of similar processes or departments. These firms usually engage in continuous mass production of a few products.

Process costing is likely used in industries such as chemicals, oil refining, textiles, paints, flour, canneries, rubber, steel, glass, food processing, mining, automobile production lines, electronics, plastics, drugs, paper, lumber, leather goods, metal products, sporting goods, cement, and watches.

Differences between job and process costing: (1) accumulating costs by job versus department, (2) collecting cost data using the job cost sheet vs. the production cost report, and (3) computing unit cost by job vs. department.

Equivalent units are the number of completed units that could have been produced given the amount of work actually performed on both complete and partially completed units.