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Materials are placed into production in the Blending Department, and labor and factory

overhead are added. When the work is finished in the Blending Department, it moves to the

Testing Department. The second process, and any succeeding processes, may add morematerials or simply work on the partially completed input from the preceding departments,

adding only labor and factory overhead, as in this example. After the product has beenprocessed by the Terminal Department, it is a completed product and becomes a part of

finished goods inventory.

Parallel Flow:

In a parallel product flow, certain portion of the work are done simultaneously and thenbrought together in a final process or processes for completion and transfer

to finished goods inventory. As in the previous illustration, materials may be added insubsequent processes.

Selective Product Flow:

In a selective product flow, the product moves to different departments within the plant,depending upon the desired final product. For example, in meet processing, after the initialbutchering process, some of the product goes directly to the Packaging Department and

then to finished goods inventory; some goes to the Smoking Department and then to the

Packaging Department and finally to finished goods inventory; Some goes to thegrinding department, then to the packaging department and lastly to finished goodsinventory. Transfer of costs from the Butchering Department involves joint cost allocation,

discussed on By-Products and Joint Products Costing page.

Procedures for Materials, Labor, and Factory Overhead Costs Accumulations:

In process costing, materials, labor, and factory overhead costs are accumulated in theusual accounts, using normal cost accounting procedures. Costs are then analyzed by

departments or processes and charged to departments by appropriatejournal entries. Thedetails involved in process costing are usually fewer than those in the job order costing,where accumulation of costs for many orders can become unwieldy.

Materials Costs:

In job order costing system, materials requisitions are used to charge jobs for

direct materials used. If requisitions are used in process costing, details are considerablyreduced because materials are charged to departments rather than to jobs, and the numberof departments using materials is usually less than the number of jobs a firm might handle

at a given time. Frequently materials are issued only to the process-originating department;subsequent department other than the first, they are charged to that departmentperforming the specific operation.