tailieunhanh - Process Costing - Costing the “Quicker-Picker-Upper”

There are three differences between job-order and process costing. First, process costing is used when a company produces a continuous flow of units that are indistinguishable from one another. Job-order costing is used when a company produces many different jobs that have unique production requirements. Second, under process costing, it makes no sense to try to identify materials, labor, and overhead costs with a particular cus- tomer order (as we did with job-order costing) because each order is just one of many that are filled from a continuous flow of virtually identical units from the production line. Accordingly, process costing. | Process Costing Costing the Quicker-Picker-Upper co o Ọ ptl co co M g co If you have ever spilled milk there is a good chance that you used Bounty paper towels to clean up the mess. Procter Gamble P G manufactures Bounty in two main processing departments Paper Making and Paper Converting. In the Paper Making Department wood pulp is converted into paper and then spooled into 2 000 pound rolls. In the Paper Converting Department two of the 2 000 pound rolls of paper are simultaneously unwound into a machine that creates a two-ply paper towel that is decorated perforated and embossed to create texture. The large sheets of paper towels that emerge from this process are wrapped around a cylindrical cardboard core measuring eight feet in length. Once enough sheets wrap around the core the eight foot roll is cut into individual rolls of Bounty that are sent down a conveyor to be wrapped packed and shipped. In this type of manufacturing environment costs cannot be readily traced to individual rolls of Bounty however given the homogeneous nature of the product the total costs incurred in the Paper Making Department can be spread uniformly across its output of 2 000 pound rolls of paper. Similarly the total costs incurred in the Paper Converting Department including the cost of the 2 000 pound rolls that are transferred in from the Paper Making Department can be spread uniformly across the number of cases of Bounty produced. P G uses a similar costing approach for many of its products such as Tide Crest toothpaste and Pringles. Source Conversation with Brad Bays formerly a Procter Gamble financial executive. Chapter LEARNING OBJECTIVES After studying Chapter 4 you should be able to LO1 Record the flow of materials labor and overhead through a process costing system. LO2 Compute the equivalent units of production using the weighted-average method. LO3 Compute the cost per equivalent unit using the weighted-average method. LO4 Assign costs to units using the weighted-average