Managerial Accounting Final Exam Ch. 12

What information is put on the Job Cost Sheets?

A summarized version of Materials, Labor and Overhead

Hybrid Costing systems

Combine features of both process and job-order costing systems. ex: custom computers

How is depreciation on manufacturing equipment recorded in ledger accounts?

Depreciation on manufacturing equipment is recorded initially in manufacturing overhead and accumulated depreciation. From the manufacturing overhead account, the cost is allocated to work in process using a predetermined overhead rate.

Equivalent Units

Equivalent units are partially complete and are part of work in process inventory. Partially completed products are expressed in terms of a smaller number of fully completed units.

How is depreciation assigned to the items produced in a job-order costing system?

In a job-order cost system the allocation is to one work in process account used to accumulate product costs for the company's jobs. It is then allocated to the job cost sheets for each production job. Finally, it is averaged across the products being produced on each job.

How is depreciation assigned to the items produced in a process costing system?

In a process cost system the allocation of depreciation from the manufacturing overhead account goes to many different work in process inventory accounts that are used to accumulate production costs for each processing department. Within each department the cost is then averaged across all products under production in the department during that period.

Primary difference between process cost flow and job-order cost flow

In the process cost system product cost accumulate cost by department. Each department has it own separate WIP inventory account. In Job-order costing systems the product cost are added up by job.

How is indirect labor recorded in ledger accounts?

Indirect labor is normally recorded in the manufacturing overhead account and allocated to work in process inventory using a predetermined overhead rate.

In a job-order costing system what are the Work in Process Inventory subsidiary records called?

Job Cost Sheets

Does a job order or a process costing system require more documentation?

Job Order, because each cost must be traced to each specific job. In process there is less documentation, but more cost averaging.

Why is a process costing system not appropriate for companies that produce items that are distinctly different from one another?

Products that are distinctly different must be designed and manufactured separately, which makes continuous production in mass quantities impossible. Under the circumstances, a process cost system is not applicable.

Is shipping an SG&A or an overhead cost?

SG&A

How do source documents help accountants operate a costing system?

Source documents provide accountants with initial data from operating departments such as production and warehouse.

What is the weighted average method of expressing equivalent units?

The weighted average method is a method used in process costing to determine equivalent units. The method ignores the state of completion of items in beginning inventory. They are assumed to be 100% complete. The equivalent units adjustment is applied only to units in ending inventory.

How do you allocate production costs between departments?

This allocation is completed by multiplying the cost per equivalent unit determined in part b by the number of equivalent units in ending inventory and by the number of units being transferred out. The allocation of costs is necessary for determining the final unit cost of a product produced. The unit cost is necessary for product pricing, for performance evaluation, and for control purposes. It is also necessary for financial statement purposes for determining ending inventory and cost of goods sold.

Per-unit cost in a process system

Total product cost/ total number of equivalent units produced during the accounting period. (both process and job-order costing uses it to a certain extent)

Transferred-in-cost.

Transferred in cost are combined with the additional materials, labor, and overhead cost incurred by each succeeding department.

Total Product Cost

When transferred to the Finished Goods Inventory account the cost represents the sum of product costs from all the departments.

Materials requisition form

a list of the materials needed to begin work (represents the authorization for raw materials to be released from storage to production.)

The three primary steps in a process cost system are as follows:

a. Determining the number of equivalent units - Incomplete units are converted into equivalent units in order to obtain an accurate unit cost. b. Finding the cost per equivalent unit - Total production costs for each department are divided by the total number of equivalent units in that department. c. Allocating production costs between departments

Job-order costing systems

accumulate costs by individual products. (boats, movies, airplanes). (Overhead is applied to each unit produced)

Process costing systems

allocate costs evenly to homogeneous products. (oil, beverage companies, food processors). Uses a per-unit costing system, which provides an average cost for each unit.

Work Ticket (time card)

provides space for the job number, employee identification, and work description. Employees record on the work ticket the amount of time they spend on each job. This information is forwarded to the accounting department. Using wage rate records , the accounting department computes the amount of labor cost and records it on the job cost sheet.

Job cost sheet

the summarization of all cost incurred to complete that job. As each job moves through production, detailed cost information for materials, labor, and overhead is recorded on the job cost sheet.