Task Team of FUNdaMENTAL aCCOUNtIng School of Business. Sun Yat-sen University 9)Product 10)Product Prodt 12)Product 13)Period 15)Period Flow of manufacturing activities Flow of manufacturing activities can be listed as the following graph: (ppt page 25) Job Order Cost Accounting Systems and Process Cost Accounting Systems Job Order Cost Accounting Systems Here the production of products responds to special orders. It is quite flexible in the number of products they can produce, where jobs involving the production of more than one unit of product are called job lots. Please refer to ppt page 27 and Process Cost Accounting Systems Process cost accounting sy stems are used for production of small, identical, low-cost items, for example, mass produced in automated continuous production process. Here costs cannot be directly traced to each unit of product. Please refer to ppt page 30 To determine the cost of goods transferred from department to department and to finished goods, we need to calculate unit cost. Unit cost is computed by dividing the accumulated costs by the number of equivalent units produced in the period. Costs are accumulated for a period of time by process or department Equivalent units is a concept expressing a number of partially completed units as a smaller number of fully completed units. For example: Three one-third full pitchers are equivalent to one all pitcher. Equivalent units may be different for material and labour and overhead at different Comparing Job Order and Process Production We can compare job order and process cost accounting systems as follows Similarities: (1)Same objective, to determine the cost of products;(2) Same inventory accounts, raw materials, goods in process, and finished goods;(3)Same overhead assignment method, predetermined rate times actual activity Differences Job order systems vs process sy stems:(1)Custom orders vs Repetitive production;(2) Heterogeneous products vs Homogeneous offering; (3)Low output volume vs High output volume;(4)High flexibility vs Low product flexibility; (5)Low to medium standardization vs High standardization Cost allocation Based on the complexity from low to high, the methods of cost allocation can be classified plant-wide overhead rate, two-stage cost allocation, and activity-based costingTask Team of FUNDAMENTAL ACCOUNTING School of Business, Sun Yat-sen University 9) Product. 10) Product. 11) Product. 12) Product. 13) Period. 14) Product. 15) Period. Flow of Manufacturing Activities Flow of manufacturing activities can be listed as the following graph: (ppt page 25) Job Order Cost Accounting Systems and Process Cost Accounting Systems Job Order Cost Accounting Systems Here the production of products responds to special orders. It is quite flexible in the number of products they can produce, where jobs involving the production of more than one unit of product are called job lots. Please refer to ppt page 27 and page 28. Process Cost Accounting Systems Process cost accounting systems are used for production of small, identical, low-cost items, for example, mass produced in automated continuous production process. Here costs cannot be directly traced to each unit of product. Please refer to ppt page 30. To determine the cost of goods transferred from department to department and to finished goods, we need to calculate unit cost. Unit cost is computed by dividing the accumulated costs by the number of equivalent units produced in the period. Costs are accumulated for a period of time by process or department. Equivalent units is a concept expressing a number of partially completed units as a smaller number of fully completed units. For example: Three one-third full pitchers are equivalent to one full pitcher. Equivalent units may be different for material and labour and overhead at different stages of a process. Comparing Job Order and Process Production We can compare job order and process cost accounting systems as follows: Similarities: (1) Same objective, to determine the cost of products; (2) Same inventory accounts, raw materials, goods in process, and finished goods; (3) Same overhead assignment method, predetermined rate times actual activity Differences (job order systems vs process systems: (1) Custom orders vs Repetitive production; (2) Heterogeneous products vs Homogeneous offering; (3) Low output volume vs High output volume; (4) High flexibility vs Low product flexibility; (5) Low to medium standardization vs High standardization. Cost Allocation Based on the complexity from low to high, the methods of cost allocation can be classified as plant-wide overhead rate, two-stage cost allocation, and activity-based costing