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Product Flow in Process Costing System:

A product can flow through a factory in numerous ways. Three product flow formats

associated with process costing - sequential, parallel, and selective - are illustrated here toindicate that basically the same costing procedures can be applied to all types of productflow situations.

Sequential Product Flow:

In a sequential product flow, each item manufactured goes through the same set ofoperation, as illustrated below.

Work in ProcessBlending Department

MaterialsLaborFOH*

Work in ProcessTesting Department

LaborFOH*

Work in ProcessTerminal Department

LaborFOH*

Finished Goods

*Factory Overhead

Materials are placed into production in the Blending Department, and labor and factoryoverhead are added. When the work is finished in the Blending Department, it moves to theTesting Department. The second process, and any succeeding processes, may add more

materials 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 offinished goods inventory.

Parallel Flow:

In a parallel product flow, certain portion of the work are done simultaneously and then

brought together in a final process or processes for completion and transferto 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 initial

butchering process, some of the product goes directly to the Packaging Department andthen 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 the

grinding department, then to the packaging department and lastly to finished goods

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