Managerial Accounting, Garrison 14th Ed. Chp. 4 Prof. Slides – Flashcards

Job-order and process costing are similar in that they both deal with assigning materials, labor, and overhead to products as a way to calculate the unit product cost. Both systems use Raw Materials Inventory, Work in Process Inventory, and Finished Goods Inventory. The flow of costs is similar, but not exactly the same, in the two systems.

Process costing is best suited for the production of a single product that is continuously produced for a long period of time. Job-order costing is best suited when jobs are produced as discrete projects. For example, building a house. Process costing accumulates costs by department, while job-order costing accumulates costs by individual jobs. Process costing uses a fundamental document called a department production report, while job-order costing uses the job cost sheet. In process costing unit cost is computed by department, while in job-order systems unit cost is computed by job.

Any unit in an organization where materials, labor, or overhead are added to the product.

The output from a processing department is homogeneous.

Typically flow in a sequence from one department to another.

The flow of costs through the manufacturing accounts is basically the same for process and job-order costing. Direct materials, direct labor, and manufacturing overhead are added to Work in Process. When work in process is completed, the costs are transferred to Finished Goods. When finished goods are sold, the costs are transferred to Cost of Goods Sold.

Job-order costing systems trace and apply manufacturing costs to jobs. One Work in Process account is often used to accumulate costs for all jobs. The individual job cost sheets serve as a subsidiary ledger.

Care traced to departments that process the goods. A separate Work in Process account is maintained for each processing department. Material, labor, and overhead costs transferred from one department's Work in Process account to another department's Work in Process account are called transferred-in costs.

Are the product of the number of partially completed units and the percentage completion of those units.

Complicate the determination of a department's output for a given period and the unit cost that should be assigned to that output.

FIFO Method The Weighted-Average Method

Makes no distinction between work done in prior or current periods. Blends together units and costs from prior and current periods. Determines equivalent units of production for a department by adding together the number of units transferred out plus the equivalent units in ending Work in Process Inventory.

Direct Labor costs may be small in comparison to other product costs in process cost systems (automation is one of the causes for this shift)

Direct labor and manufacturing overhead may be combined into one classification.

Units Completed & Transferred + Equivalent Units Remaining in WIP

Operating Cost is a hybrid of job-order and process costing because it possesses attributes of both approaches.

Batches of many different products pass through the same processing department.