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Managerial Accounting For Dummies by Mark P. Holtzman

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Chapter 8

Process Costing: Get In Line

In This Chapter

arrow Looking at the differences between process costing and job order costing

arrow Making accounting entries for process costing

arrow Stepping through a model process costing system

arrow Preparing a cost of production report

People give Henry Ford credit for inventing the assembly line, which enabled him to produce thousands of identical Model T automobiles (in any color, as long as it’s black, as Ford said) starting in 1908. Mass producing automobiles dramatically reduced their cost and price, making them affordable for most families.

However, standardized production goes back much farther than Henry Ford. At the end of the 1700s, Eli Whitney started to manufacture standardized parts to make firearms, reducing costs and simplifying production. Workers no longer needed to spend time custom-fitting every part to work in each unit. If any part of one of Whitney’s muskets broke, an equivalent part could easily replace it.

Today, the principles behind Whitney’s standardized production and Ford’s assembly line work hand-in-hand, allowing manufacturers ...

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