Ch 4 Mang Acct

If ending work in process contains 300 units that are 40% complete under the number of equivalent units is _______

120 300x0.4=120

A processing department transferred 2,000 units to the next department. Ending WIP contained 100 units that were 40% complete with regard to materials and 25% complete with regard to conversion costs. Using the weighted average, the equivalent units of production for materials is ______.

2,040 2,000+ (100x40%)

company occupies a building is 50000 square feet of the total square footage 5000 is used by service dept. #1, 10,000 is used by service dept. #2 and the 35,000 is used by the two operating departments. Under the direct method of service department allocation, square footage used in the allocation of service Dept. #1's costs will be:

35,000 sq ft under the direct method, any allocation base attributed to service departments is ignored

When computing the equivalent units of production under the weighted-average method, partially completed ______ inventory is ignored.

beginning WIP

Costs per equivalent unit are used to value

both units in ending inventory and units transferred to the next department

FIFP method

calculates unit costs based solely on the costs and outputs form the current period

Weighted-average method

calculates unit costs by combining costs and outputs from the current and prior periods

process costing

convert raw materials into homogeneous products (bricks, soda or paper) on a continuous basis -General Mills (flour) -Scott Paper (paper towels) -sometimes used in companies with assembly operations -utilities that produce gas, water, electricity

Conversion cost

direct labor PLUS manufacturing overhead

the direct method allocates service department costs

directly to operating departments

when production is completed in the last processing department, units are transferred to the ______ account

finished goods

In process costing, manufacturing overhead costs are:

generally applied using a predetermined overhead rate

the step-down method begins allocating cost with the department that provides the _____ amount of service to other service departments

greatest

services provided between service departments are known as _____ services

interdepartmental

examples of products that may use operation costing include

jewelry clothing shoes flour: process costing

the two common methods of determining unit product costs are

job-order costing and process costing

operations costing is similar to process costing because

labor and overhead costs are accumulated by operations or department

job-order costing

many different jobs or products are worked on each period that have unique production requirements

the two types of department in large organizations are

operating and service

in situations where products have some common characteristics and some individual characteristics, ____ costing is used

operation

processing department

organizational unit where work is performed on a product and where materials, labor, or overhead costs are added to the product -ex: Nalley potato chip factory: preparing potatoes, one for cooking, one for inspecting and packaging -activity in processing department is performed uniformly on all fo the units passing through it -output of the processing department is homogenous (idenitical)

when using the step-down method, after a service department's costs have been allocated

other service department costs are not allocated back to it

when units costs are transferred from department a to department b, department b will treat the costs as

transferred in

units in beginning work in process inventory + units started into production or transferred in =

units in ending WIP + units completed and transferred out

similarities between job-order and process costing

1. same basic purposes-assign material, labor, manufacturing overhead costs to products and to provide a mechanism for computing unit product costs 2.use same basic manufacturing accounts (OH, Raw materials, WIP, and finished goods) 3.flow of costs through the manufacturing accounts is basically the same

LPM industries has two service (Administration and Maintenance) and two operating departments. Departmental costs before allocation are $950,000 for Administration and $1,650,000 for Maintenance. Maintenance costs are allocated on the basis of the number of LPM employees. Administration has 450 employees; Maintenance has 750 employees; Operating Department 1 has 1,350 employees and Operating Department 2 has 1,200 employees. Using the step-down method, how much of the cost from the Maintenance Department will be allocated to Administration

$247,500 $1,650,000 x 450/(450+1,350+1,200)

Cost in beginning work in process inventory was $4,500 and $37,800 in costs were added during the period. Under the weighted-average method, if there are 7,050 equivalent units, the cost per equivalent unit is $_______.

$6($4,500 + $37,800) / 7,050 = $6

At Megan's Classic Cream Soda, some materials (i.e., water, flavors, sugar, and carbon dioxide) are added in the Formulating Department and some materials (i.e., bottles, caps, and packing materials) are added in the Bottling Department The journal entry to record the materials used in the first processing department, the Formulating Department, is as follows

Dr: WIP -formulating Cr: Raw Materials

In process costing, labor costs are traced to departments—not to individual jobs. The following journal entry records the labor costs in the Formulating Department at Megan's Classic Cream Soda

Dr: WIP -formulating Cr: Salaries and Wages Payable

equivalent units of production under the weighted-average method equal:

Equivalent units in ending work in process + units transferred out Beginning WIP is ignored

LPM industries has two service (Administration and Maintenance) and two operating departments. Departmental costs before allocation are $950,000 for Administration and $1,650,000 for Maintenance. Maintenance costs are allocated on the basis of the number of LPM employees. Administration has 450 employees; Maintenance has 750 employees; Operating Department 1 has 1,350 employees and Operating Department 2 has 1,200 employees. Using the direct method, Maintenance cost allocated to operating department 1 is

$873,529 1,650,000 x 1350/(1,350+1200)

Differences between job-order and process costing

(1)J-O: many different jobs are worked on during each period with each job having a unique production requirements (1)PC: single product is produced either on a continuous basic or for a long periods of time, all units of product are identical (2)J-O:costs are accumulated by individual job (2)costs are accumulated by department (3)J-O:unit costs are computed by job on the job cost sheet (3)PC: units costs are computed by department

cost per equivalent unit

(Cost of beginning WIP inventory + Cost added during period) / EU's of production

products most likely to use a process costing system include

-flour-toothpaste-gasoline

companies allocate service department costs to operating department to

-motivate managers -evaluate managerial performance

examples of operating departments includes

-surgery department at a hospital -production department at a manufacturer -geography department at a university

LPM industries has two service (Administration and Maintenance) and two operating departments. Departmental costs before allocation are $950,000 for Administration and $1,650,000 for Maintenance. Maintenance costs are allocated on the basis of the number of LPM employees. Administration has 450 employees; Maintenance has 750 employees; Operating Department 1 has 1,350 employees and Operating Department 2 has 1,200 employees. Using the direct method, the cost allocated from Maintenance to Administration is

0

weighted-average method steps

1. compute the equivalent units of production 2. compute the cost per equivalent unit 3. assign costs of units 4. prepare a cost reconciliation report

Finally, when a customer's order is filled and units are sold, the cost of the units is transferred to Cost of Goods Sold:

Dr: COGS Cr: Finished Goods

After processing has been finished in the Bottling Department, the costs of the completed units are transferred to the Finished Goods inventory account

Dr: Finished Goods Cr: WIP -bottling

The following journal entry transfers the cost of the units that have been completed within the Formulating Department to the Bottling Department

Dr: WIP -bottling Cr: WIP -formulating

In process costing, as in job-order costing, predetermined overhead rates are usually used. Manufacturing overhead cost is applied according to the amount of the allocation base that is incurred in the department. The following journal entry records the overhead cost applied in the Formulating Department

Dr: WIP -formulating Cr: Manufacturing Overhead

equivalent units

The product of the number of partially completed units and their percentage of completion with respect to a particular cost. -Equivalent units are the number of complete whole units that could be obtained from the materials and effort contained in partially completed units.

recording the transfer of partially completed products from one processing department to another, requires a debit and a credit to the __ account in both of the processing departments.

WIP

when using process costing, each processing department has a separate ___ ____ ___ account

WIP