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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 to
indicate that basically the same costing procedures can be applied to all types of product
flow situations.
Sequential Product Flow:
In a sequential product flow, each item manufactured goes through the same set of
operation, as illustrated below.

Work in Process
Blending Department
Materials
Labor
FOH*



Work in Process
Testing Department

Labor
FOH*



Work in Process
Terminal Department

Labor
FOH*



Finished Goods


*Factory Overhead
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 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 been
processed 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 then
brought together in a final process or processes for completion and transfer
to finished goods inventory. As in the previous illustration, materials may be added in
subsequent 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 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 the
grinding department, then to the packaging department and lastly to finished goods
inventory. 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 the
usual accounts, using normal cost accounting procedures. Costs are then analyzed by
departments or processes and charged to departments by appropriate journal entries. The
details involved in process costing are usually fewer than those in the job order costing,
where accumulation of costs for many orders can become unwieldy.

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