We describe the flow of costs in a process costing system and prepare appropriate journal entries to record costs. A process costing system accumulates costs by department and assigns these costs uniformly to all units that pass through the department during a period. We also introduce the concept of equivalent units of production. Equivalent units is computed as the product of the number of partially completed units and the percentage completion of those units with respect to the processing in the department. We also learn about operation costing, a hybrid system, and understand how it differs from both job-order and process costing.

(For each of the five transactions described below, use the dropdown boxes to indicate which account should be debited and which account should be credited.)

Transaction Debit Credti
Raw materials worth S 12,000 were issued for use in the Cutting Department
Manufacturing overhead was applied to the Shaping Department, $10, 000
Unshaped, cut snowboards worth 90.000 were transferred from the Cutting
Department to the Shaping Department.
Finished snowboards worth $80,000 were transferred from the Shaping
Department to the finished goods warehouse.
Finished bricks that cost $100,000 were sold to customers.