TF 2 Flashcards- Managerial Accounting

Process Costing Flashcards

TERM: Process Costing System DEFINITION: Costing system where all product costs for the period are accumulated and divided evenly over all units produced.

TERM: Work in Process (WIP) DEFINITION: Inventory account that tracks partially completed goods in a manufacturing process.

TERM: Job Order Costing vs. Process Costing DEFINITION: Job order costing accumulates costs by job, while process costing accumulates costs by department.

TERM: Example of Companies Using Process Costing DEFINITION: Jelly Belly Candy Company, soft drink bottlers, and paint manufacturers like Sherwin Williams.

TERM: Cost Accumulation in Process Costing DEFINITION: Costs are accumulated by department rather than by job.

TERM: Stages of Production in Process Costing DEFINITION: Includes multiple work in process accounts such as Mixing, Baking, and Cooling.

TERM: Work in Process - Mixing DEFINITION: Account that tracks direct materials, labor, and overhead costs during the mixing stage of production.

TERM: Work in Process - Baking DEFINITION: Account that tracks costs incurred during the baking process.

TERM: Work in Process - Cooling DEFINITION: Account that tracks costs incurred during the cooling stage of production.

TERM: Journal Entry - Transfer of Costs Between Departments DEFINITION: Debit: Work in Process - Next Department XXX Credit: Work in Process - Previous Department XXX

TERM: Similarities Between Job Order and Process Costing DEFINITION: Both accumulate direct materials, direct labor, and manufacturing overhead and track costs through inventory accounts.

TERM: Differences Between Job Order and Process Costing DEFINITION: Process costing mass produces identical products with continuous production, while job order costing tracks unique products.

TERM: Equivalent Units (EU) DEFINITION: Measure used in process costing that represents unfinished units in terms of completed units.

TERM: Equivalent Units Calculation DEFINITION: Add units completed and transferred out to the equivalent units of ending work in process.

TERM: Conversion Costs DEFINITION: Production costs that include direct labor and manufacturing overhead.

TERM: Calculating Equivalent Units Example DEFINITION: 100,000 units at 60% completion are equivalent to 60,000 completed units.

TERM: Physical Unit Flow Calculation DEFINITION: Beginning WIP + Units Started = Units Transferred Out + Ending WIP.

TERM: Cost Reconciliation in Process Costing DEFINITION: Ensures that total costs from beginning inventory and new costs added match the total costs allocated.

TERM: Allocating Product Costs to Units DEFINITION: Equivalent cost per unit = Total costs / Equivalent units of production.

TERM: Cost per Equivalent Unit Calculation DEFINITION: Total costs for materials and conversion costs divided by equivalent units.

TERM: Ending WIP Cost Calculation DEFINITION: Multiply equivalent units in WIP by cost per equivalent unit.

TERM: Cost Transferred to Next Department DEFINITION: Multiply units transferred out by cost per equivalent unit.

TERM: Steps in Process Costing DEFINITION: 1. Calculate physical unit flow, 2. Determine equivalent units, 3. Compute cost per equivalent unit, 4. Allocate costs, 5. Reconcile costs.

TERM: Journal Entry - Costs Added to WIP DEFINITION: Debit: Work in Process - Department XXX Credit: Raw Materials Inventory, Wages Payable, Overhead Applied XXX

TERM: Journal Entry - Transferring Completed Goods DEFINITION: Debit: Finished Goods Inventory XXX Credit: Work in Process - Last Department XXX

TERM: Cost Allocation for Partially Completed Units DEFINITION: Assign costs based on percentage of completion for materials and conversion costs.

TERM: Reconcile Costs Equation DEFINITION: Beginning WIP balance + Costs added = Costs transferred out + Ending WIP balance.

TERM: Key Document in Process Costing DEFINITION: Departmental production report.

TERM: Key Document in Job Order Costing DEFINITION: Job cost sheet.

TERM: Units Transferred Out Calculation DEFINITION: Beginning inventory + Units started - Ending inventory.

TERM: Cost Flow in Process Costing DEFINITION: Raw Materials → WIP 1 → WIP 2 → Finished Goods → Cost of Goods Sold.

TERM: Importance of Equivalent Units DEFINITION: Ensures fair cost allocation between completed and partially completed units.

TERM: Overhead in Process Costing DEFINITION: Applied to each department based on a predetermined overhead rate.

TERM: Equivalent Units for Materials vs. Conversion DEFINITION: Materials and conversion costs may have different completion percentages and require separate calculations.

TERM: Final Step in Process Costing DEFINITION: Reconciliation of all costs to ensure proper allocation and transfer of costs between departments.

TERM: Why Use Process Costing? DEFINITION: Suitable for industries with continuous production and homogeneous products.

TERM: Weighted Average vs. FIFO in Process Costing DEFINITION: Two methods to assign costs, with weighted average blending costs and FIFO keeping costs separate by period.

TERM: Cost per Unit in Process Costing DEFINITION: Total costs divided by total equivalent units.

TERM: Work in Process Inventory Role DEFINITION: Tracks production costs for unfinished goods at different production stages.

TERM: Transferred-in Costs DEFINITION: Costs accumulated in previous departments that carry forward to the next department.

TERM: Beginning Inventory Impact on Costing DEFINITION: Affects cost allocation depending on whether weighted average or FIFO is used.

TERM: Cost of Goods Manufactured (COGM) in Process Costing DEFINITION: Total manufacturing costs assigned to completed units during the period.

TERM: Cost of Goods Sold (COGS) in Process Costing DEFINITION: Cost assigned to finished goods sold during the period.

TERM: Process Costing in Decision Making DEFINITION: Helps managers determine pricing, budgeting, and cost control strategies.