Why can the computation of cost of goods sold be problematic in process costing? Are the...

Why can the computation of cost of goods sold be problematic in process costing?

Are the product costs accounted for the same way in process costing as they are in job order costing?

Solutions

Expert Solution

Cost Of Good Sold (COGS) :

Its start with the cost of opening inventory of finished goods in that add goods manufactured cost and finally subtract ending inventory cost of finished goods.

COGS = Beginning inventory of finished good + Production cost - Closing inventory of finished good

Under the process costing closing inventory from one process is the opening inventory for another process so cost of good sold is needed at all the level and in each process. so we analysis that in every stage of the COGS is calculated with due care otherwise it create problem for finding cost of one process to another process as their are various process accounts are made in the process costing so that output of one process account is input for another .Hence, their is need to proper control over COGS in order to find cost of the finished product.

Product cost under job costing and process costing:

The aim of job costing and process costing is to determine the cost of the product. Due to the fact that both have the same cost flow and also objective is to find the product cost for the organization .

-Both job cost system and process cost system uses predetermined overhead rates to apply to the overheads.

-Both have same goals to determine the cost of the product.

-Both job and process cost system have the same cost flow due to this production recorded in same rate account for

Material inventory/stock

Labor

Overhead,and accordingly transfer the cost to the work in progress (WIP) inventory account

-Management is needed unit cost information for decision making process under both the job costing and the process costing.

ekkarill92 answered 1 year ago

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