Processing Costing
February 2013
ACCT 102 Managerial Accounting
Oil Refinery: A Typical Example for the use of Process Costing
Objectives
☯To understand what is process costing
☯To understand the physical flow and basic entries in a process costing system
☯To be able to calculate the production cost able in a process costing system by using the the Weighted Average method
1
Comparison of Job-Order Costing and Process Costing
JobJob-order costing
The oil refining process starts with a fractional distillation column.
Typical Application of Process Costing
Process
Costing
Process costing
Job-Order
Job-order
Costing
Costs
Costs accumulated by the job. job. Costs
Costs accumulated by department or process. process. Work
Work in process has a jobjob-cost sheet for each job. job.
Work
Work in process has a production report for each batch of products. products. Chocolate Making (e.g. Hershey’s)
Many unique, high cost hi jobs. jobs. A few identical, low cost id products. products. Oil Refinery
Refinery
Units
Units continuously produced for inventory in automated process.
Paint manufacturer
Jobs
Jobs built to customer order. Typical process cost applications: http://www.hersheys.com/ads-and-videos/how-we-make-chocolate.aspx?video=raw-ingredients http://www.youtube.com/watch?v=rdTpA0luD2U
http://www.youtube.com/watch?v=jvYgXJgoLJ0&feature=related
http://painting.about.com/od/artsupplies/youtube/paint_factory.htm
Paper mill
3
Cheng Nam Sang
2
http://www.youtube.com/watch?v=7SdJtYkAzTw
4
1
February 2013
ACCT 102 Managerial Accounting
Job-order and Process Costing
Applications:
Types of Processes
Sequential:
Process 1
Process 2
Process 3
Process 2
Process 4
Finished
Product X
Process 3
Parallel:
1.
2.
3.
4.
5.
6.
Finished
Goods
Process 5
Finished
Product Y
Process 1
Process 1
Process 2
Qn: Find out
ACCT 102 Managerial Accounting
Oil Refinery: A Typical Example for the use of Process Costing
Objectives
☯To understand what is process costing
☯To understand the physical flow and basic entries in a process costing system
☯To be able to calculate the production cost able in a process costing system by using the the Weighted Average method
1
Comparison of Job-Order Costing and Process Costing
JobJob-order costing
The oil refining process starts with a fractional distillation column.
Typical Application of Process Costing
Process
Costing
Process costing
Job-Order
Job-order
Costing
Costs
Costs accumulated by the job. job. Costs
Costs accumulated by department or process. process. Work
Work in process has a jobjob-cost sheet for each job. job.
Work
Work in process has a production report for each batch of products. products. Chocolate Making (e.g. Hershey’s)
Many unique, high cost hi jobs. jobs. A few identical, low cost id products. products. Oil Refinery
Refinery
Units
Units continuously produced for inventory in automated process.
Paint manufacturer
Jobs
Jobs built to customer order. Typical process cost applications: http://www.hersheys.com/ads-and-videos/how-we-make-chocolate.aspx?video=raw-ingredients http://www.youtube.com/watch?v=rdTpA0luD2U
http://www.youtube.com/watch?v=jvYgXJgoLJ0&feature=related
http://painting.about.com/od/artsupplies/youtube/paint_factory.htm
Paper mill
3
Cheng Nam Sang
2
http://www.youtube.com/watch?v=7SdJtYkAzTw
4
1
February 2013
ACCT 102 Managerial Accounting
Job-order and Process Costing
Applications:
Types of Processes
Sequential:
Process 1
Process 2
Process 3
Process 2
Process 4
Finished
Product X
Process 3
Parallel:
1.
2.
3.
4.
5.
6.
Finished
Goods
Process 5
Finished
Product Y
Process 1
Process 1
Process 2
Qn: Find out