W2331321

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CHAPTER 17 Process Costing Overview This chapter explains how process-costing systems determine the cost of products or services. In the simplest case, a process has no beginning or ending work-in-process inventory. Considerable complexity is added when a process has both beginning and ending work-in-process inventory; this case necessitates selecting an inventory costflow method. The chapter illustrates two of these methods: the weighted-average method and the first-in, first-out (FIFO) method. Many detailed exhibits are included in the chapter because process costing is highly procedural. The chapter also explains how operation-costing systems determine the cost of products. The Appendix to the chapter describes the…show more content…
Because of the difficulties in estimating completion percentages for conversion costs, department supervisors and line managers— individuals most familiar with the process—often make these estimates. 6. Steps 3, 4, and 5 together are called the production cost worksheet. In Step 3, total costs to account for are equal to the sum of the amounts debited to the department’s Work in Process account. When there is no beginning inventory, the Assembly Department’s debits are for direct materials used and conversion costs incurred during the period. Step 4 computes cost per equivalent unit by dividing the costs in each input cost category by the respective quantity of equivalent units. Step 5 assigns total costs to account for from Step 3 (a) to units completed and transferred out of the process and (b) to units remaining in process at the end of the period. EXHIBIT 17-2, text p.634, shows the details for Steps 3, 4, and 5 in Case 2. 7. Using dollar amounts from EXHIBIT 172, journal entries for the Assembly Department for February are as follows: 224 CHAPTER 17 Work in Process–Assembly Accounts Payable Control 32,000 Work in Process–Assembly Various accounts 18,600 32,000 18,600 Work in Process–Testing 24,500 Work in Process–Assembly 24,500 Because the Assembly Department had no beginning

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