Financial and Managerial Accounting

Chapter 17 Process Costing

Learning Objectives

After studying this chapter, you should be able to:

1. Understand who uses process cost systems.
2. Explain the similarities and differences between job order cost and process cost systems.
3. Explain the flow of costs in a process cost system.
4. Make the journal entries to assign manufacturing costs in a process cost system.
5. Compute equivalent units.
6. Explain the four steps necessary to prepare a production cost report.
7. Prepare a production cost report.

Feature Story

Ben & Jerry's Tracks Its Mix-Ups

Ben & Jerry's Homemade, Inc., based in Waterbury, Vermont, started its first ice cream shop in a former gas station in 1978.

Making ice cream is a process—a movement of product from a mixing department to a prepping department to a pint department. The mixing department is where the ice cream is created. In the prep area, the production process adds extras such as cherries and dark chocolate to make plain ice cream into “Cherry Garcia,” Ben & Jerry's most popular flavor, or fudge-covered waffle cone pieces and a swirl of caramel for “Stephen Colbert's Americone Dream.” The pint department is where the ice cream is actually put into containers. As ...