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    Manufacturing: Process Costing in Industry

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    1.Process costing differs from job order costing in the way costs are accounted for. Share your thoughts about the accounting differences in process costing versus job order costing, and explain how manufacturing costs are accounted for in process costing. Further explain why the cost per equivalent unit are determined separately for direct materials and for conversion costs under different methods of determining the cost of completed and transferred out units and the cost of ending work in process inventory. Additionally, discuss the type of production most suitable to employ a process costing system by providing an example.

    2.Debate the merits of the different methods of determining the cost of equivalent units.

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    Solution Preview

    Step 1
    The accounting differences in processes costing versus job order costing arise from the fact that in job order costing the detailed accumulation of product costs related to either a specific unit or a group of units. For example, the construction of a custom built home would be accounted for with a job order costing. The cost of all material such as cement, bricks, plaster etc used in the construction of the home would be charged to the job linked to that home. These making costs can be used to bill the customer or to track the profits the company earned on the construction job associated with that house.
    In process costing there is accumulation of costs for lengthy production runs that involve products that identical to each other. For example, the production of 100,000 yards of steel strapping requires that all steel used in the process and all labor in the strap making plants ...

    Solution Summary

    This solution explains process costing. The sources used are also included in the solution.

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