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Process Costing

Both job-order costing and process costing assign material, labor, and overhead costs to products and compute unit product costs. They use the same manufacturing accounts. However, process costing is used for a single product made continuously, while job-order costing is used for different jobs. Process costing accumulates costs by department using production reports, while job-order costing uses job cost sheets. Process costing computes unit costs each period, while job-order costing does so for each job. The weighted average method for process costing involves computing output and costs in equivalent units to assign costs to completed and work-in-process units.

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Hassan Elbayya
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32 views18 pages

Process Costing

Both job-order costing and process costing assign material, labor, and overhead costs to products and compute unit product costs. They use the same manufacturing accounts. However, process costing is used for a single product made continuously, while job-order costing is used for different jobs. Process costing accumulates costs by department using production reports, while job-order costing uses job cost sheets. Process costing computes unit costs each period, while job-order costing does so for each job. The weighted average method for process costing involves computing output and costs in equivalent units to assign costs to completed and work-in-process units.

Uploaded by

Hassan Elbayya
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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COST ACCOUNTING

CHAPTER 4: PROCESS
COSTING
SIMILARITIES BETWEEN JOB-ORDER
AND PROCESS COSTING
• Both systems assign material, labor and overhead
costs to products and they provide a mechanism for
computing unit product cost.
• Both systems use the same manufacturing accounts,
including Manufacturing Overhead, Raw Materials,
Work in Process, and Finished Goods.
• The flow of costs through the manufacturing
accounts is basically the same in both systems.
DIFFERENCES BETWEEN JOB-ORDER AND
PROCESS COSTING
• Process costing is used when a single product is produced on a
continuing basis or for a long period of time. Job-order costing is
used when many different jobs are worked on each period.
• Process costing systems accumulate costs by department. Job-order
costing systems accumulated costs by individual jobs.
• Process costing systems use department production reports to
accumulate costs. Job-order costing systems use job cost sheets to
accumulate costs.
• Process costing systems compute unit costs each period. Job-order
costing systems compute unit costs by each job.
EQUIVALENT UNITS OF PRODUCTION
WEIGHTED-AVERAGE METHOD
STEPS:

• Step 1: Compute output in terms of equivalent


units
• Step 2: Compute the total costs (TC)
• Step 3: Compute the cost per equivalent unit
• Step 4: Assign the costs to the units completed
• Step 5: Assign the costs to units in end WIP

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