ACCTG 221 Chap.3 Job and Process Costing Systems
Job and Process Costing Systems
Job costing accumulates direct material, direct labour and applied overhead for identifiable jobs. Process costing follows homogeneous output through departments and spreads cost across equivalent units. Both systems require a clear cost flow and a reconciliation. Predetermined overhead rates support timely job costing, while equivalent-unit calculations prevent partly completed units from being treated as fully complete.
Weighted-average process costing combines opening work with current-period effort.
What this chapter covers
- 01
Job cost sheets and subsidiary records
- 02
Predetermined overhead rates and applied overhead
- 03
Underapplied and overapplied overhead
- 04
Physical flow reconciliation in process costing
- 05
Equivalent units for materials and conversion
- 06
Weighted-average cost per equivalent unit
Worked example · free
Waitematā Foods: weighted-average equivalent units
- +1Reconcile physical output: 920 transferred plus 320 ending equals 1,240 units to account for.
- +2Materials equivalent units = 920 + 320 × 100% = 1,240.
- +2Conversion equivalent units = 920 + 320 × 40% = 1,048.
Key terms
- Job cost sheet
- The record accumulating costs for a specific job.
- Predetermined rate
- Budgeted overhead divided by budgeted allocation-base quantity.
- Applied overhead
- Overhead assigned to production using a predetermined rate.
- Equivalent unit
- A complete-unit expression of partly completed work.
- Conversion cost
- Direct labour plus manufacturing overhead.
Job and Process Costing Systems FAQ
When is job costing appropriate?
Use job costing when outputs are distinguishable and costs can be traced to individual contracts, batches or services. A custom project normally needs its own cost record, whereas continuous homogeneous production points toward process costing.
Why use a predetermined overhead rate?
Actual overhead and actual activity are not fully known until period end. A predetermined rate provides timely product costs during the period, then underapplied or overapplied overhead records the difference from actual overhead.
What is the first process-costing check?
Reconcile physical units before assigning any cost. Opening work plus units started must equal units transferred plus ending work and any separately identified loss. If the physical flow fails, equivalent units cannot be trusted.
Exam move
For job costing, draw three arrows into work in process: direct materials, direct labour and applied overhead. Calculate the overhead rate once, label its denominator and use the job's actual allocation-base quantity. Compare applied with actual overhead only after jobs are costed. For process costing, use a four-stage worksheet: physical flow, equivalent units, cost per equivalent unit and cost assignment.
Never combine materials and conversion until each has its own equivalent-unit denominator. Finish with two proofs: physical units in equal physical units out, and total cost to account for equals cost transferred plus ending work. Those checks catch most missing opening balances and incorrect completion percentages. Create separate templates for the two systems and practise choosing between them from production evidence.
The job template should show source documents for material and labour, the predetermined overhead rate, driver use, applied overhead, total job cost and unit cost. Add a final comparison of applied and actual overhead, but do not push the period-wide difference back into the individual job unless instructed.
The process template should begin with physical units, then display separate equivalent-unit columns for materials and conversion, cost per equivalent unit, and cost assignment. Rework examples in which materials enter at the start, throughout production or at a later point; the materials completion percentage changes with that fact while conversion usually reflects effort across the process.
Include opening work so weighted-average treatment cannot be mistaken for current-period-only analysis. After each schedule, prove both quantities and dollars. Explain any small rounding difference rather than hiding it in one output category.
To prepare for written parts, compare why a custom service can use job records while a homogeneous department uses averaging, and describe how a hybrid operation can combine batch identification with process rates. A strong timed answer announces the cost object, labels every rate with its unit and finishes with the reconciliation before discussing management use.
Include one transfer between departments in revision and track both the physical units and the cost carried forward. When a cost per equivalent unit is rounded, retain extra decimals until the final assignment and disclose any residual. This discipline prevents an apparently missing cost from being manufactured by early rounding rather than by the production flow.
Archive one fully reconciled worksheet for each system and annotate where every source quantity enters, so later mistakes can be traced quickly.
Working through Job and Process Costing Systems in ACCTG 221? Sia is AskSia’s AI Accounting tutor — ask any ACCTG 221 Job and Process Costing Systems question and get a clear, step-by-step explanation grounded in how ACCTG 221 is taught and assessed. Read this chapter free, then take your hardest questions to Sia.