Question
In: Accounting
Discuss the uses of a process cost system and how it compares to a job order...
Discuss the uses of a process cost system and how it compares to a job order sytem. Can you provide examples of each?
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Expert Solution
Solution:
Process costing means a system that accumlates cost incurred to produce a product that goes through different processes/department for its completion.
For example, the production of gasoline requires all oil used in the process, as well as all labor in the refinery facility. Costs are likely to be accumulated at the department level and then cost of one process transferred to another process and total cost of production is divided by number of unit produced to arrived at unit cost.
Job costing involves accumulation of production costs attributable to specific units or groups of units. Under job order costing, managers and workers track costs on a per-job basis.
The differences between process cost system and job order system are as under:
1. Job costing accumulates costs by individual jobs. Process costing accumulates costs by process or department.
2. Job cost systems have one Work in Process Inventory account for each job. Process cost systems have a Work in Process Inventory account for each department / process.
3. Job costing is used for unique products, and process costing is used for standardized products.
4. Job costing requires much more record keeping, since labor and materials must be charged to specific jobs. Process costing aggregates costs, and so requires less record keeping.
5. Job costing is used for very small production runs, and process costing is used for large production runs.
ekkarill92 answered 1 year agoRelated Solutions
Discuss the uses of a process cost system and how it compares to a job order...
Discuss the uses of a process cost
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Materials purchased on account, $695,900
Materials requisitioned, $584,560, of which $75,990 was for
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Factory labor used, $716,780, of which $136,190 was
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Other costs incurred on account for factory overhead, $167,020;
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Materials purchased on account, $732,780
Materials requisitioned, $615,540, of which $80,020 was for
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Factory labor used, $754,760, of which $143,400 was
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selling expenses, $271,130; and administrative expenses,
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Munson Co. uses a job order cost system. The following data
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Materials purchased on account, $496,630
Materials requisitioned, $417,170, of which $54,230 was for
general factory use
Factory labor used, $511,530, of which $97,190 was
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Other costs incurred on account for factory overhead, $119,190;
selling expenses, $183,750; and administrative expenses,
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Prepaid expenses expired for factory overhead, $22,840; for
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Entries for Costs in a Job Order Cost System
Royal Technology Company uses a job order cost system. The
following data summarize the operations related to production for
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Materials purchased on account, $591,670.
Materials requisitioned, $497,000, of which $64,610 was for
general factory use.
Factory labor used, $609,420, of which $115,790 was
indirect.
Other costs incurred on account for factory overhead, $142,000;
selling expenses, $218,920; and administrative expenses,
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Prepaid expenses expired for factory overhead were $27,220; for
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Royal Technology Company uses a job order cost system. The
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March:
Materials purchased on account, $820,330.
Materials requisitioned, $689,080, of which $89,580 was for
general factory use.
Factory labor used, $844,940, of which $160,540 was
indirect.
Other costs incurred on account for factory overhead, $196,880;
selling expenses, $303,520; and administrative expenses,
$180,470.
Prepaid expenses expired for factory overhead were $37,740; for
selling...
Entries for Costs in a Job Order Cost System Royal Technology Company uses a job order...
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the operations related to production for March: Materials purchased
on account, $738,430. Materials requisitioned, $620,280, of which
$80,640 was for general factory use. Factory labor used, $760,580,
of which $144,510 was indirect. Other costs incurred on account for
factory overhead, $177,220; selling expenses, $273,220; and
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following data summarize the operations related to production for
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Materials purchased on account, $492,950.
Materials requisitioned, $414,080, of which $53,830 was for
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Factory labor used, $507,740, of which $96,470 was indirect.
Other costs incurred on account for factory overhead, $118,310;
selling expenses, $182,390; and administrative expenses,
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Prepaid expenses expired for factory overhead were $22,680; for
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administrative expenses, $110,600. Prepaid expenses expired for
factory overhead, $24,500; for selling expenses,...
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