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Summary Chapter 17: Process Costing
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Summary of chapter 17: process costing
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Process Costing in-process inventoryo averaging of costs
Case 2—Process costing with zero beginning work-in-process
inventory and some ending work-in-process inventory
o five steps of process costing and the concept of equivalent
units
Case 3—Process costing with both some beginning and some
ending work-in-process inventory
o effects the weighted-average and first-in, first-out (FIFO)
methods have on the cost of units completed and the cost
of work-in-process inventory
The main difference between process costing and job costing is the extent
of averaging used to compute the unit costs of products or services. Case 2
In a job-costing system, individual jobs use different quantities of resources,
so it would be incorrect to cost each job at the same average production
cost.
In contrast, when identical or similar units of products or services are mass-
produced rather than processed as individual jobs, process costing is used
to calculate an average production cost for all units produced.
Conversion costs are all manufacturing costs other than direct material
costs, including manufacturing labor, energy, plant depreciation, and so
Step 1: Summarize the flow of physical units of output.
Step 2: Compute output in terms of equivalent units.
Step 3: Summarize the total costs to account for.
Step 4: Compute the cost per equivalent unit.
Step 5: Assign the total costs to the units completed and to the units in
ending work-in-process inventory.
on.
Costs are separated into costs categories according to when they
are introduced into the process
o All direct materials are added tot he process a tone time
o Conversion costs are added tot he process
Three cases of process costing:
Case 1—Process costing with zero beginning and zero ending work
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