M1 Unit 3

Unit 3 Discussion

1. Briefly, compare and contrast job costing with process costing. Provide an example of process costing.

Job costing and process costing define the costs of the product; they both track how manufacturing costs such as direct material, direct labor, overhead flow through work-in-process to the finished goods, and when goods are sold to the cost of goods sold (Heisinger & Hoyle, 2012, page. 201). In other words, they both use the same manufacturing accounts such as Raw Materials, Work in Process, Overhead, and Finished goods.

The difference between job costing and processing costing is that the first applies when different and unique jobs are worked on each period, and process costing applies when products are produced in

When a company purchases raw materials it will be recorded in Raw Material inventory. Once the raw materials are used, their costs are transferred to the Work in Process inventory account as direct material. Moreover, direct labor and overhead costs are also charged to the Work in Process inventory (http://novellaqalive2.mhhe.com/sites/0073379417/student_view0/ebook/chapter2/chbody3/product_cost_flows.html). As the process of a production is complete, the goods are transferred to the Finished Goods inventory, and then the finished products are sold. Once the products are sold, the costs are transferred to the Cost of Goods

And once this raw material is used for melting, mixing, rolling, scoring, and conditioning to produce the gum, the cost would be transferred to the Work in Process inventory as direct material cost. Also in this process, direct labor and overhead costs would be added to the Work in Process inventory. Once the process is complete, the product would be transferred to the Finished Goods inventory. The finished product would then be sold and once it is sold, the costs would be transferred to cost of goods sold.

3. What is contained in a product cost report? Describe how to generate a production cost report.

The product cost report summarizes the production and cost activity within a department for a reporting a period. In order to generate the production cost report, we have to follow the four steps to assign costs. The steps to generate the production report is to 1) summarize physical units, 2) summarize costs, 3) calculation of cost per equivalent unit, and 4) assign costs to units transferred out and unit in ending WIP inventory (Heisinger & Hoyle, 2012, page. 202).

Reference:

1) Heisinger, K., & Hoyle, J. B.(2012). Accounting for Managers. Creative Commons by-nc-sa 3.0. Retrieved from: