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Chapter Summary

Section 21.1: Compare and Contrast Job Order Costing and Process Costing​

  • Job order: Unique products, costs by job
  • Process: Identical products, costs by process
  • Choose based on product characteristics
  • Some businesses use both

Section 21.2: Conversion Costs​

  • Conversion costs = Direct labor + Manufacturing overhead
  • Costs of converting materials into finished products
  • Separated from direct materials
  • Important for process costing

Section 21.3: Equivalent Units - Initial Stage​

  • Equivalent units account for partially completed units
  • Calculated separately for materials and conversion
  • Cost per equivalent unit = Total costs ÷ Equivalent units
  • Costs allocated to completed and in-process units
  • Process cost report summarizes information

Section 21.4: Equivalent Units - Subsequent Stages​

  • Multi-stage processes have transferred-in costs
  • Transferred-in costs from previous stages
  • Additional materials and conversion in current stage
  • Equivalent units calculated for each cost category
  • Costs accumulate through stages

Section 21.5: Journal Entries​

  • Purchase materials
  • Issue materials to processes
  • Record direct labor
  • Apply overhead
  • Transfer between processes
  • Transfer to finished goods
  • Sell finished goods
  • Record cost of goods sold

Section 21.6: Luxembourg Manufacturing SME Process Costing​

  • Food processing examples
  • Beverage production examples
  • Multi-stage processes
  • VAT and social charges considerations
  • PCN account structure
  • Cost control and management