Chapter 16



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.

*8. Compute equivalent units using the FIFO method.

*Note: All asterisked (*) items relate to material contained in the Appendix to the chapter.


In contrast to job order cost accounting, which focuses on the individual job, process cost accounting focuses on the processes involved in mass-producing products that are identical or very similar in nature. The primary objective of the chapter is to explain and illustrate process cost accounting. The content and organization of this chapter are as follows:



Process Manufacturing and Accounting

  1. (L.O. 1) Process cost systems are used to apply costs to similar products that are mass produced in a continuous fashion, such as the production of ice cream, steel or soft drinks. In comparison, costs in a job order cost system are assigned to a specific job, such as the construction of ...

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