chapters 4,5,6

what is conversion cost?

Direct Labor + Manufacturing Overhead

the difference in treatment of costs transferred from Department A to Department B When compared to materials and conversion costs is that cost transferred in..?

Will always be !00% completed with respect to Department A

What is job order costing?

a costing system used in situations where many different products, jobs, or services are produced each period

What is a processing department?

an organizational unit where work is performed on a product and where materials, labor, or overhead costs are added to the product.

when computing the equivalent units of production under the weight ed average method, partially completed BLANK inventory is ignored.

beginning work in process

cost per equivalent units are used to value

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

Weighted Average Method

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

True or false: a processing department needs to calculate a separate unit cost for each type of cost incurred.

true

when unit cost is transferred in from department A to Department B, Department B will treat the unit as

transferred in

When production is completed in the last processing department units are transferred to the ?

finished goods

FIFO method of process costing

method in which equivalent units and unit costs relate only to work done during the current period

Finally, note that

that materials, labor, and overhead costs can be added in any processing department—not just the first. Costs in Department B's Work in Process account consist of the materials, labor, and overhead costs incurred in Department B plus the costs assigned to the units transferred in from Department A (called transferred-in costs).

equivalent units

number of partially completed units x the percentage completion Roughly speaking, the equivalent units is the number of complete units that could have been obtained from the materials and effort that went into the partially complete units.

the weighted average method includes cost for ?

costs from the prior and current periods.

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

equivalent units in ending work in process plus units transferred out .

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

units in ending work in process inventory + units completed and transferred out

What are some Similarities between Job-Order and Process Costing ?

Both systems have the same basic purposes—to assign material, labor, and manufacturing overhead costs to products and to provide a mechanism for computing unit product costs. Both systems use the same basic manufacturing accounts, including Manufacturing Overhead, Raw Materials, Work in Process, and Finished Goods. The flow of costs through the manufacturing accounts is basically the same in both systems.

What are the two essential features of processing departments?

First, the activity in the processing department is performed uniformly on all of the units passing through it. Second, the output of the processing department is homogeneous; in other words, all of the units produced are identical.

What are the four steps to the weighted average method of process costing.

Step 1: Compute the equivalent units of production. Step 2: Compute the cost per equivalent unit. Step 3: Assign costs to units. Step 4: Prepare a cost reconciliation report.

The BLANK method of allocating service department costs ignores services provided by one service department to other service departments

Direct

What are some differences between Job-Order and Process Costing ?

First, job-order costing is used when a company produces many different jobs that have unique production requirements. Process costing is used when a company produces a continuous flow of units that are indistinguishable from one another. Second, job-order costing uses job cost sheets to accumulate costs for individual jobs. Process costing accumulates costs by department (rather than by job) and assigns these costs uniformly to all identical units that pass through the department during a period. Third, job-order costing uses job cost sheets to compute units costs for each job. Process costing systems compute unit costs by department.

Step 2: Compute the Cost per Equivalent Unit what

In step 2 we need to determine the total cost to include in the numerator and then divide it by the equivalent units of production that we already calculated in step 1 to derive the cost per equivalent unit for materials and conversion. To help us with this step, Exhibit 4-8 displays the Shaping and Milling Department's cost data for the Month of May.

Note that the numerator is the sum of the cost of beginning work in process inventory and of the cost added during the period. Thus, the weighted-average method blends together costs from the prior and current periods. That is why it is called the weighted-average method; it averages together costs and outputs from the current and prior periods.

Note that the numerator is the sum of the cost of beginning work in process inventory and of the cost added during the period. Thus, the weighted-average method blends together costs from the prior and current periods. That is why it is called the weighted-average method; it averages together costs and outputs from the current and prior periods.

What is process costing?

Process costing is used to allocate costs to individual products when the products are all relatively similar and are mass-produced. Process costing is basically applicable to assembly lines and anything that shares a similar production process. In process costing all of the costs incurred by a process (a process is often referred to as a department) are collected and then allocated to the individual goods that were produced, or worked on, during that period within that process (or department).

exhibit 4.5 point 3

The third point to highlight from Exhibit 4-5 is that the Shaping and Milling Department's ending work in process inventory is 40% complete with respect to materials and 25% complete with respect to conversion. This means that 40% of the materials cost and 25% of the conversion costs required to complete the units in ending work in process inventory have already been incurred. Under the weighted-average method, these two completion percentages pertaining to the ending work in process inventory (40% for materials and 25% for conversion) will be included in the computation of equivalent units of production.

Equivalent units of production equals the number of units transferred in to the next department (or finished goods) plus equivalent units in ending work in process under which method(s) of costing?

Weighted average only.

exhibit 4-5 point 1

The first thing to note about Exhibit 4-5 is the flow of units through the department (focus on the data under the Units heading). The department started with 200 units in beginning work in process inventory. During May, 5,000 units were started into production. This made a total of 5,200 units. Of this total, 4,800 units were completed during May and transferred to the next department and 400 units were still in the department's ending work in process inventory. In general, the units in beginning work in process inventory plus the units started into production must equal the units in ending work in process inventory plus the units completed and transferred out. In equation form, this is: