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CH 2 Process Costing
CH 2 Process Costing
CH 2 Process Costing
2
Process Costing
Process Costing
Used in companies that produce a single product
for long periods of time.
Such as:
Coca cola cans.
Paper Co.
Cement Co.
Oil refinery
Product Cost per Unit = Total manufacturing costs / Total units produced
Similarities Between Job-Order and
Process Costing:
1) Both systems assign Material, Labor and
Overhead costs to products.
DM+DL+MOH (TMC)
WIP
FG
COGS
Equivalent Units
Associated with the units that partially completed
at the end of an accounting period (WIP).
Equivalent units =
# of partially completed units x % of completion
Example (1):
A company have 500 units in ending WIP
inventory that are 60% complete. What are the
equivalent units?
solution
Equivalent units = # of partially completed units x
% of completion
500 units the same as, 300 fully complete units computed
Equivalent units
of production
Equivalent units of production =
Production Data:
• Work in Process, May 1 10,000 units
Materials: 100% complete
Conversion: 80% complete
• Units started into production during May 100,000 units
• Units completed and transferred out ? units
• Work in Process, May 31 15,000
Materials: 60% complete
Conversion: 20% complete
Cost Data:
• Work in Process, May 1
Materials cost $1,500
Conversion cost $7,200
Total $8,700
Cost added during May:
Materials cost $154,500
Conversion cost $ 90,800
Total $245, 300