Advantages of a Process Costing System
ACCT283B group project
Chapter 18: Process Costing
Abstract
This paper identifies the key points on Process Costing. It covers over various topics like the flow of costs through a process costing system, how to calculate equivalent units of production for direct materials and conversion costs, the preparation of a production cost report, and how to prepare journal entries for a process costing system. Examples will also be shown on how process costing is used in the real world through cases, projects, and even shown through corporation situations.
Chapter 18: Process Costing The manufacturing process is set up into an “either/ or” setting. It all depends on the ability to trace input costs to finished goods. The two paths that it can take is either Job Order costing or Process Costing. “Process Costing System is an accounting system that accumulates costs by process and is used by companies that manufacture identical units through a series of uniform production steps or processes” (Nobles, Mattison, and Matsumura, 2013, p.1070). Process costing usually includes products that are large in batch and that might include up to a month of production. Some examples of process costing system in companies that produce continuously are cereal, bread, candy, steel, automotive parts, chips, and computers. Also, companies that refine oil, bottle drinks, sort mail, and catalog orders. The best example of flow of costs through a process costing system is similar to the one shown in Horngren’s Financial and Managerial Accounting text book. Southwestern Candle Company divides their manufacturing operations into three processes: mixing, molding, and packaging. The Mixing Department combines direct materials such as paraffin wax and pigments. The heated mixture is then pumped to the next step which is the Molding Department. The heated mixture is then poured into molds. When the mold cools then the candles are removed from the molds and are
Chapter 18: Process Costing
Abstract
This paper identifies the key points on Process Costing. It covers over various topics like the flow of costs through a process costing system, how to calculate equivalent units of production for direct materials and conversion costs, the preparation of a production cost report, and how to prepare journal entries for a process costing system. Examples will also be shown on how process costing is used in the real world through cases, projects, and even shown through corporation situations.
Chapter 18: Process Costing The manufacturing process is set up into an “either/ or” setting. It all depends on the ability to trace input costs to finished goods. The two paths that it can take is either Job Order costing or Process Costing. “Process Costing System is an accounting system that accumulates costs by process and is used by companies that manufacture identical units through a series of uniform production steps or processes” (Nobles, Mattison, and Matsumura, 2013, p.1070). Process costing usually includes products that are large in batch and that might include up to a month of production. Some examples of process costing system in companies that produce continuously are cereal, bread, candy, steel, automotive parts, chips, and computers. Also, companies that refine oil, bottle drinks, sort mail, and catalog orders. The best example of flow of costs through a process costing system is similar to the one shown in Horngren’s Financial and Managerial Accounting text book. Southwestern Candle Company divides their manufacturing operations into three processes: mixing, molding, and packaging. The Mixing Department combines direct materials such as paraffin wax and pigments. The heated mixture is then pumped to the next step which is the Molding Department. The heated mixture is then poured into molds. When the mold cools then the candles are removed from the molds and are
References: Nobles, T., Mattison,B., & Matsumura, E. (2013). Horngren’s Financial & Managerial Accounting (4th ed.). Boston, MA: Pearson.