ACC 122: Cost Accounting and Control

Student Activity Sheet Module # 11

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

Lesson title: Materials:

Lesson Objectives: Textbook, SAS, & calculator
At the end of this module, I should be able to References:
1. Describe the basic characteristics of process costing, Hansen & Mowen; Cost Accounting &
including cost flows, journal entries, and the cost of Control; 2019 Edition
production report Vanderbeck, Edward J.; Principles of
2. Describe process costing for settings with or without work-in- Cost Accounting; 15th edition
Lanen, Anderson & Maher;
process inventories
Fundamentals of Cost Accounting; 5th
edition

Productivity Tip:
Using a calendar, choose 2 days this week when you’ll review the content of this module. Set aside
20-30 minutes for this review.

A. LESSON PREVIEW/REVIEW

1) Activity 1 : Introduction/Review (10 mins)

Done with the 1st period, say hello to 2nd period! I hope you did well last grading period. If you did,
always put your feet on the ground because as they say “You are only as good as the last grading period”.
But if things didn’t go well, don’t give up! Everyone has an equal footing here, you have another chance
to learn and develop your cost accounting knowledge and skills.
In this module, you will learn another cost accounting system which is the process costing.
Process costing is quite different from a job-order costing system particularly the cost flow system which
will be discussed in a while.
To give you a jumpstart, let’s just have a quick activity. Within 3 mins, write as much as you can
the products that you know that tends to be homogeneous ones. Don’t forget to set your timer. 🕑
3….2….1….go!
Examples: cement, shampoo, screw

2) Activity 2 (LO1 & LO2): What I Know Chart, part 1 (10 mins)
Alright! Let’s see what you already know, answer the first column (What I know). Leave the third
column (What I Learned) blank at this time.
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 ACC 122: Cost Accounting and Control
Student Activity Sheet Module # 11

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

What I Know Questions What I Learned (Activity 5)

1. What is the difference between
process costing and job-order
costing?

2. What is equivalent units of

production?

3. What is the usual

manufacturing firm that employs
process costing with no work in
process inventories?

B. MAIN LESSON
1) Activity 3 (LO1 and LO2): Content Notes (45 mins)

Make sure to highlight or underline the important parts! Go to chapter 6 of your textbook found on
pages 258-273 for a more detailed discussion regarding the topic.

LO1: Describe the basic characteristics of process costing, including cost flows, journal
entries, and the cost of production report

Process Costing is defined as a branch of operation costing, that determines the cost of a
product at each stage, i.e. process of production. It is an accounting method which is adopted by
the factories or industries where the standardized identical product is produced, as well as it
passes through multiple processes for being transformed into the final product.

BASIC FEATURES OF PROCESS COSTING

1. Homogeneous units pass through a series of similar processes.
2. Each unit in each process receives a similar dose of manufacturing costs.
3. Manufacturing costs are accumulated by a process for a given period of time.
4. There is a work-in-process account for each process.
5. Manufacturing cost flows and the associated journal entries are generally similar to job-order
costing.
6. The departmental production report is the key document for tracking manufacturing activity
and costs.
7. Unit costs are computed by dividing the departmental costs of the period by the output of the
period.

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This document is the property of PHINMA EDUCATION.
 ACC 122: Cost Accounting and Control
Student Activity Sheet Module # 11

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

Differences in the Cost Flows For Process-Costing System and Job-Order Costing System

JOB ORDER SYSTEM PROCESS COSTING SYSTEM

Job order cost system is appropriate when Process cost system is appropriate when
products are manufactured on a special order similar goods are manufactured in a
basis. continuous or mass production operation.
Accumulates production costs by job Accumulates production costs by process
Uses a single Work in Process account Has a work-in-process (W I P) account for
every process
Transferred-in cost: Cost transferred from a
prior process to a subsequent process

PRODUCTION REPORT
➢ Traces the flow of units through a department and identifies the costs charged
• Shows the computation of unit costs and reveals the disposition of the
department’s costs for the reporting period
➢ Divided into unit information and cost information sections
➢ Unit information section
• Units to account for
• Units accounted for

➢ At the end of the period, the department manager submits a report showing the following:

1. Number of units in the beginning work in process.

2. Number of units completed.
3. Number of units in the work in process and their estimated stage of completion.

UNIT COST
➢ Key input to the cost of production report
➢ Presence of significant work-in-process inventories complicates cost and output
definitions needed for unit cost calculation

Cost of Production Summary-One Department

▪ The reporting of production and related costs in each department involves the following:
1. Accumulating costs for which the department is accountable.
2. Calculating equivalent production for the period.
3. Computing the unit cost for the period.
4. Summarizing the disposition of the production costs.

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 ACC 122: Cost Accounting and Control
Student Activity Sheet Module # 11

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

Journal entry to record factory operations

Work in Process xx
Materials xx
Payroll xx
Factory Overhead xx

Factory Overhead xx
Various Accounts xx

Journal entry to record cost of goods completed

Finished Goods xx
Work in Process xx

Cost of Production Summary-Multiple Departments

▪ When there is more than one department, it is necessary to keep separate control
accounts in the general ledger for recording the costs of operating each department.
▪ A cost of production summary must be prepared for each department along with separate
journal entries to record the operations of each department and the transfer of costs.
▪ Costs accumulated in each department are transferred to the next department in the
production cycle.
▪ The transferred units and their related costs are treated as completed units in the one
department and as raw materials in the next department.
▪ The transferred-in costs and units from the prior department are not included in the
calculation of unit cost and equivalent units on the next department’s cost of production
summary.
▪ If there is still another department, the first department’s costs must be considered in
transferring cost to the next department.
▪ The first department’s costs are also considered in the costing of the ending work in
process inventory in the second department.

Blanking Forming Finishing

Department Department Department

Journal entry to record issuance of materials in the process

Work in Process – Blanking xx
Work in Process – Forming xx
Work in Process – Finishing xx
Factory Overhead – Materials xx

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 ACC 122: Cost Accounting and Control
Student Activity Sheet Module # 11

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

Materials xx

Journal entry to record labor in the process

Work in Process – Blanking xx
Work in Process – Forming xx
Work in Process – Finishing xx
Factory Overhead – Materials xx
Materials xx

Journal entry to record factory overhead

Work in Process – Blanking xx
Work in Process – Forming xx
Work in Process – Finishing xx
Factory Overhead – Blanking xx
Factory Overhead – Forming xx
Factory Overhead – Finishing xx

Factory Overhead xx
Various Accounts xx

Factory Overhead – Blanking xx

Factory Overhead – Forming xx
Factory Overhead – Finishing xx
Factory Overhead xx

Journal entry to record transfers to various departments

Work in Process – Forming xx
Work in Process – Blanking xx

Work in Process – Finishing xx

Work in Process – Forming xx

Journal entry to record cost of goods completed

Finished Goods xx
Work in Process – Finishing xx

LO2: Describe process costing for settings with or without work-in-process inventories

Process Costing with No Work-In-Process Inventories

• Adopted by:

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 ACC 122: Cost Accounting and Control
Student Activity Sheet Module # 11

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

o Companies that provide homogeneous, repetitively produced services

o Just-in-time (J I T) manufacturing firms
• Emphasize continuous improvement and the elimination of waste
• Strive to minimize inventories
• Objective - Simplification
• Create work cells that produce a product or subassembly from start to finish
• Unit costs are computed by dividing the costs of the period by output of the
period
This will be discussed further on the following modules, you may refer to chapter 11 of your textbook
o A unit completed and transferred out during the period is not identical to one in
ending work-in-process (W I P) inventory
o Cost attached to the two units should not be the same
o Both completed units and partially completed units should be considered while
computing the unit cost

Role of Activity-Based Costing (A B C) in Manufacturing Process

• Assign overhead shared by processes or cells to the individual processes and cells
o Overhead located within the cell belongs exclusively to the product, and activities
may be shared by processes (cells)
• Activity rates are used to assign overhead to individual processes
You may refer to chapter 4 of your textbook for a more detailed discussion about this topic.

Process Costing with Work-In-Process Inventories

When a company has its work in process inventory, costing of the inventories should be
properly valued. But since the products produced in this kind of process are homogeneous
products it is difficult to assign costs individually since there are numerous products placed into
process unlike a job-order product that can be easily traced directly by just referring to the job cost
sheet. Products that are already started but not yet finished in the production will be valued using
equivalent units of production (EUP).

Equivalent Units of Production

• Complete units that could have been produced given the total amount of productive effort
expended for the period under consideration
• Every transferred-out unit is an equivalent unit
•
Steps in Building a Production Report for Process Costing
1. Preparation of a physical flow schedule
o Physical flow schedule: Provides an analysis of the physical flow units
2. Calculation of the period’s equivalent units
3. Unit cost calculation
4. Valuation of inventories
5. Cost reconciliation

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 ACC 122: Cost Accounting and Control
Student Activity Sheet Module # 11

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

o Costs in beginning W I P and costs incurred during the current period should equal
the total costs assigned to goods transferred out and to goods in ending W I P

Approaches That Help deal with Prior-Period Output and Costs

• First-in, first-out (F I F O) costing method
• Weighted average method

2) Activity 4: Skill-building Activities (60mins) SCORE: ________________

Let’s try to practice what you have learned! Check your answers against the Key to Corrections
found at the end of this SAS. Write your score on the space provided.

Part I (LO1)
Answer Cornerstone 6.1 in chapter 6 found on page 297 of your textbook.
Answer Exercise 6.11 in chapter 6 found on page 301 of your textbook.

PART II (LO2)
Answer Cornerstone 6.2 up to 6.6 in chapter 6 found on pages 297-299 of your textbook.

3) Activity 5: What I Know Chart, part 2 (5 mins)

It’s time to answer the questions in the “What I Know Chart” in Activity 2. Write your answers in
the “What I Learned” column. Let’s see your improvement!

4) Activity 6 (LO & LO): Check for Understanding (60 mins)

To better test your knowledge on the topic, answer individually the following activities below. To
check if you got it right, your teacher will provide you with the key answers. Be honest in checking your
answers. ☺

Part I (LO1)
Answer Exercise 6.13 in chapter 6 found on page 302 of your textbook.
Answer Exercise 6.15 in chapter 6 found on page 303 of your textbook.

PART II (LO2)
Answer Exercise 6.12 & 6.14 in chapter 6 found on page 302-303 of your textbook.

C. LESSON WRAP-UP

1) Activity 7: Thinking about Learning (10 mins)

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This document is the property of PHINMA EDUCATION.
 ACC 122: Cost Accounting and Control
Student Activity Sheet Module # 11

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

1. Work Tracker
You are done with this session! Let’s track your progress. Shade the session number you just
completed.

2. Think about your Learning

From a rating of 1-10, determine if you have learned all the learning objectives. What is the reason of
your rating?
__________________________________________________________________________________
__________________________________________________________________________________

What part of the module gave you a hard time to comprehend?

__________________________________________________________________________________
__________________________________________________________________________________

Any other questions or concerns you want to raise?

__________________________________________________________________________________
__________________________________________________________________________________

2) Assignment
To better enhance your knowledge regarding the topic, answer Exercise 6.15 & 6.24 of chapter 6 found
on pages 303 & 306 in your textbook. Your teacher will provide you with the key answers.

FAQs
1. What industries use process costing?
Paper, petroleum, chemical, textile, lumber and food processing industries commonly use process
costing. The weighted average method is the most common process costing system used in practice. This
method includes a few basic steps when costing products.

2. Does Coca Cola use process costing?

Coca-Cola uses process costing to track product and customer costs such as direct materials, direct
labor, and factory overhead costs incurred in three major processes: (1) concentrate and syrup manufacturing,
(2) blending, and (3) packaging.

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