MidTerm StudyGuide Chapter 4

in industries that convert raw materials into homogeneous (i.e., uniform) products, such as bricks, soda, or paper, on a continuous basis

4.0 When is process costing used?

(4.0) Process costing

A costing method used when essentially homogeneous products are produced on a continuous basis.

(2.1) Job-order costing

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

(2.1) Job-order costing

Are these companies using Job-order costing or process costing? -Levi Strauss clothing factory making different types of jeans. -Large-scale construction projects management by Bechtel International. -Commercial aircraft product by Boeing. -Greeting cards designed and printed by Hallmark. -Airline meals prepared by LSG SkyChefs. All of these examples are characterized by diverse outputs. Each Bechtel project is unique and different from every other.

(4.0) process costing

Are these companies using Job-order costing or process costing? -Reynolds Consumer Products (aluminum ingots) -Schoo Paper (paper towels) -General Mills (flour) -ExxonMobil (gasoline and lubricating oils) -Coppertone (sunscreens) -Kellogg's (breakfast cereals) Is used most commonly in industries that convert raw materials into homogeneous (i.e., uniform) products, such as bricks, soda, or paper, on a continuous basis.

Cost to be accounted for Cost of beginning work in process inventory $3,570 Cost added to production during the period $43,120 Total cost to be accounted for $46,690 Cost accounted for as follows Cost of ending work in process inventory $2,860 cost of units transferred out $43,830 Total cost accounted for $46,690 ( Cost of units transferred out = Total cost to be accounted for - Cost of ending work in process inventory Cost of units transferred out = 46,960 - 2,860 = 43,830 )

Maria Am Corporation uses a process costing system. The Baking Department is one of the processing departments in its strudel manufacturing facility. In June in the Baking Department, the cost of beginning work in process inventory was $3,570, the cost of ending work in process inventory was $2,860, and the cost added to production was $43,120 Prepare a cost reconciliation report for the Baking Department for June.

Equivalent units

Number of partially completed units x Percentage completion = ?

cost of ending inventory $47,280 cost of units transferred to next department $552,500 ( cost of ending inventory = equivalent units of production x cost per equivalent unit cost of ending inventory for materials = 2,400 x 12.50 = 30,000 cost of ending inventory for labor = 1,800 x 3.20 = 5,760 cost of ending inventory for overhead = 1,800 x 6.40 = 11,520 Total cost of ending inventory = 30,000 + 5,760 + 11,520 = 47,280 cost of ending work in process inventory = units transferred to next department x cost per equivalent unit cost of ending work in process inventory for materials = 25,000 x 12.50 = 312,500 cost of ending work in process inventory for labor = 25,000 x 3.20 = 80,000 cost of ending work in process inventory for overhead = 25,000 x 6.40 = 160,000 total cost of ending work in process inventory = 312,500 + 80,000 + 160,000 = 552,500 )

Superior Micro Products uses the weighted-average method in its process costing system. During January, the Delta Assembly Department completed its processing of 25,000 units and transferred them to the next department. The cost of beginning inventory and the costs added during January amounted to $599,780 in total. The ending inventory in January consisted of 3,000 units, which were 80% complete with respect to materials and 60% complete with respect to labor and overhead. The costs per equivalent unit for the month were as follows: Cost per equivalent unit... Materials $12.50 Labor $3.20 Overhead $6.40 Compute the cost of ending inventory and of the units transferred to the next department for January.

materials 27,400 units labor is 26,800 units overhead 26,800 ( Equivalent units = Number of partially completed units x percentage completion Equivalent units for materials = 3,000 x 0.8 = 2,400 Equivalent units for labor = 3,000 x 0.6 = 1,800 Equivalent units for overhead = 3,000 x 0.6 = 1,800 Equivalent units of production = Units transferred to the next department or to finished goods + Equivalent units in ending work in process inventory Equivalent units of production for materials = 25,000 + 2,400 = 27,400 units Equivalent units of production for labor = 25,000 + 1,800 = 26,800 Equivalent units of production for overhead = 25,000 + 1,800 = 26,800 )

Superior Micro Products uses the weighted-average method in its process costing system. During January, the Delta Assembly Department completed its processing of 25,000 units and transferred them to the next department. The cost of beginning inventory and the costs added during January amounted to $599,780 in total. The ending inventory in January consisted of 3,000 units, which were 80% complete with respect to materials and 60% complete with respect to labor and overhead. The costs per equivalent unit for the month were as follows: Cost per equivalent unit... Materials $12.50 Labor $3.20 Overhead $6.40 Compute the equivalent units of materials, labor, and overhead in the ending inventory for the month.

total cost to be accounted for $599,780 cost of ending work in process inventory $47,280 cost of units completed and transferred out 552,500 total cost accounted for $559,780 ( total cost to be accounted for = cost of beginning work in process inventory + cost added to production during the period total cost to be accounted for = 599,780 it is given cost accounted for = cost of ending work in process inventory + cost of units transferred out cost accounted for = 47,280 + 552,500 = 599,780 )

Superior Micro Products uses the weighted-average method in its process costing system. During January, the Delta Assembly Department completed its processing of 25,000 units and transferred them to the next department. The cost of beginning inventory and the costs added during January amounted to $599,780 in total. The ending inventory in January consisted of 3,000 units, which were 80% complete with respect to materials and 60% complete with respect to labor and overhead. The costs per equivalent unit for the month were as follows: Cost per equivalent unit... Materials $12.50 Labor $3.20 Overhead $6.40 Prepare a cost reconciliation for January. (Note: You will not be able to break the cost to be accounted for into the cost of beginning inventory and cost added during the month.)

Equivalent units of production (Weighted-average method. A separate calculation is made for each cost category in each processing department)

Units transferred to the next department or to finished goods + Equivalent units in ending work in process inventory