Process Costing - Single Department
PROCESS COSTING-SINGLE DEPARTMENT
INTRODUCTION
In process costing system, a large number of homogenous products passed through several production departments where each department is responsible for one or more operations that bring a product one step closer to completion. In each department, materials, labor and overhead inputs may be needed and upon completion of a particular process, the partially completed goods are transferred to another process.
SIMILARITIES AND DIFFERENCES OF JOB ORDER AND PROCESS COSTING SYSTEM
The cost flows for a process cost system are basically similar to those of a job order costing system, both job order and a process cost system track the same three manufacturing cost elements, the materials, labor and overhead. In both costing systems, all raw materials received from suppliers are debited to Raw Materials Inventory account, all factory labor is debited to Factory Payroll and all overhead incurred are debited to Manufacturing Overhead Account. The three cost elements are then assigned to the same accounts in both costing systems – WIP Inventory, FG Inventory and COGS.
The major differences between a job order and process cost system are summarized below:
Features Job Order Cost System Process Cost System
a.) WIP Accounts * One for multiple jobs * One for each process
b.) Documents Used * Job cost sheets * Cost of Production Reports
c.) Determination of Total Manufacturing Cost * Each job * Each Period
d.) Unit Cost Computation * Cost of each job / units * Total Manufacturing costs / produced for the job units produced during the period
PROCESS COST FLOW
MATERIAL COST
All raw materials are debited to Raw Materials Inventory when the materials are purchased. When materials are issued to production departments, the entry is:
Work-in-Process-Department 1 XXX Raw Materials Inventory XXX
Materials may be issued to production at different stages. It may be
INTRODUCTION
In process costing system, a large number of homogenous products passed through several production departments where each department is responsible for one or more operations that bring a product one step closer to completion. In each department, materials, labor and overhead inputs may be needed and upon completion of a particular process, the partially completed goods are transferred to another process.
SIMILARITIES AND DIFFERENCES OF JOB ORDER AND PROCESS COSTING SYSTEM
The cost flows for a process cost system are basically similar to those of a job order costing system, both job order and a process cost system track the same three manufacturing cost elements, the materials, labor and overhead. In both costing systems, all raw materials received from suppliers are debited to Raw Materials Inventory account, all factory labor is debited to Factory Payroll and all overhead incurred are debited to Manufacturing Overhead Account. The three cost elements are then assigned to the same accounts in both costing systems – WIP Inventory, FG Inventory and COGS.
The major differences between a job order and process cost system are summarized below:
Features Job Order Cost System Process Cost System
a.) WIP Accounts * One for multiple jobs * One for each process
b.) Documents Used * Job cost sheets * Cost of Production Reports
c.) Determination of Total Manufacturing Cost * Each job * Each Period
d.) Unit Cost Computation * Cost of each job / units * Total Manufacturing costs / produced for the job units produced during the period
PROCESS COST FLOW
MATERIAL COST
All raw materials are debited to Raw Materials Inventory when the materials are purchased. When materials are issued to production departments, the entry is:
Work-in-Process-Department 1 XXX Raw Materials Inventory XXX
Materials may be issued to production at different stages. It may be