21-121-2Learning ObjectivesDiscuss the uses of a process Discuss the uses of a process cost system cost system and how it and how it compares to a compares to a job order job order system.system.1 1Explain the flow of costs in a process cost system and the Explain the flow of costs in a process cost system and the journal entries to assign manufacturing costs.journal entries to assign manufacturing costs.2 2Compute equivalent units.Compute equivalent units.3 3Complete the four steps to prepare a Complete the four steps to prepare a production production cost report.cost report.4 4Process Costing21Explain just-in-time (JIT) Explain just-in-time (JIT) processing and processing and activity-based costing activity-based costing (ABC).(ABC).5 521-3uUse to apply costs to similar products that are mass- produced in a continuous fashion.uExamples include the production of cereal, paint, manufacturing steel, oil refining and soft drinks. Uses of Process Cost SystemsLEARNING OBJECTIVEDiscuss the uses of a process cost system Discuss the uses of a process cost system and how it compares to a job order system.and how it compares to a job order system.1Illustration 21-1 Manufacturing processesLO 121-4Examples of companies that primarily use either a process cost system or a job order cost system.Use of Process Cost SystemsIllustration 21-2 Process cost and job order cost companies and productsLO 121-5Which of the following items is not a characteristic of a process cost system:a.Once production begins, it continues until the finished product emerges.b.The focus is on continually producing homogenous products. c.When the finished product emerges, all units have precisely the same amount of materials, labor, and overhead.d.The products produced are heterogeneous in nature. QuestionUse of Process Cost SystemsLO 121-6Service companies that provide individualized, non-routine services will probably benefit from using a job order cost system. Those that perform routine, repetitive services will probably be better off with a process cost system.Process Cost for Service CompaniesLO 121-7Job Order CostuCosts assigned to each job.uProducts have unique characteristics.Process CostuCosts tracked through a series of connected manufacturing processes or departments.uProducts are uniform or relatively homogeneous and produced in a large volume.Similarities and Differences Between Job Order Cost and Process Cost SystemsLO 121-8Illustration 21-3 Job order cost and process cost flowJob Order Cost and Process Cost FlowLO 121-9SIMILARITIES1.Manufacturing cost elements. 2.Accumulation of the costs of materials, labor, and overhead. 3.Flow of costs.1.Number of work in process accounts used.2.Documents used to track costs. 3.Point at which costs are totaled. 4.Unit cost computations.DIFFERENCESJob Order Cost and Process Cost FlowLO 121-10Job Order Cost and Process Cost FlowIllustration 21-4 Job order versus process cost systemsLO 121-11Indicate which of the following statements is not correct:a.Both a job order and a process cost system track the same three manufacturing cost elements direct materials, direct labor, and manufacturing overhead.b. In a job order cost system, only one work in process account is used, whereas in a process cost system, multiple work in process accounts are used.c. Manufacturing costs are accumulated the same way in a job order and in a process cost system.d. Manufacturing costs are assigned the same way in a job order and in a process cost system. QuestionUse of Process Cost SystemsLO 121-12Indicate whether the following statements are true or false.1.A law firm is likely to use process costing for major lawsuits.2.A manufacturer of paintballs is likely to use process costing.3.Both job order and process costing determine product costs at the end of a period of time, rather than when a product is completed.4.Process costing does not keep track of manufacturing overhead.FalseTrueFalseFalseLO 1DO IT!Compare Job Order and Process Cost Systems.121-13Process Cost FlowTyler Company manufactures roller blade and skateboard wheels that it sells to manufactures and retail outlets. Manufacturing consists of two processes: machining and assembly. The Machining Department shapes, hones, and drills the raw materials. The Assembly Department assembles and packages the parts.LEARNING OBJECTIVEExplain Explain the flow of costs in a process cost system and the flow of costs in a process cost system and the journal entries to assign manufacturing coststhe journal entries to assign manufacturing costs. .2Illustration 21-5 Flow of costs in process cost systemLO 221-14uAccumulation of the cost of materials, labor, and overhead is the same as in job order costing.Debit Raw Materials Inventory for purchases of raw materials.Debit Factory Labor for factory labor incurred.Debit Manufacturing Overhead for overhead cost incurred.uAssignment of the three manufacturing cost elements to Work in