ACG2071 - Chapter 4
One way to compute equivalent units under the FIFO method is add units transferred _____ to equivalent units in ______ Work in Process Inventory and then subtract the equivalent units in ______ Work in Process inventory.
out ; ending ; beginning
Work is performed on products, and materials, labor, and overhead costs are added to products in a _______ department.
processing
Prior costs are blended with current period costs when using the _______ method.
weighted-average
From a cost control perspective, the best method for process costing is _______.
FIFO
If there are no beginning or ending inventories, then the FIFO and weighted-average methods will produce identical results because unit costs ______.
Will be based on just the current period's costs.
When many different jobs or products are worked on each period, the most likely costing system used is _______.
job-order
Operations costing is similar to process costing because _______.
labor and overhead costs are accumulated by operation or department.
Examples of Industries/Products more suitable for process costing than job-order costing include:
- Sunscreen - Paper towels - Flour (Any product that is identical to the next)
Under the FIFO method, the cost of units transferred out consists of the cost ______.
- in the beginning work in process inventory - to complete beginning work in process inventory - of units started and completed during the period.
Services provided between service departments are known as _______ services.
- interdepartmental - reciprocal
To calculate cost per equivalent unit using the weighted-average method, add the cost of _______ work in process inventory to costs added during the period and divide by equivalent units of production.
beginning
In both the FIFO and weighted-average methods, costs to be account for include ______ work in process inventory, while costs accounted for include ______ work in process inventory.
beginning ; ending
The method of allocating service department costs that ignores services provided by one service department to other service departments is the _____ method.
direct
Examples of products that may use operation costing include _______.
- Jewelry - Shoes - Clothing
Characteristics of operation costing include _______.
- Products are processed in batches. - Costs are accumulated by department.
Equivalent units of production under the weighted-average method equal ______.
Equivalent units in ending work in process plus units transferred out.
When production is completed in the last processing department, units are transferred to the _____ account.
Finished Goods
Recording the transfer of partially completed products from one processing department to another, requires a journal entry that affects the ______ account of both processing departments.
Work in Process
Under the ______ method, any allocation base attributed to service departments is ignored.
direct
Purchasing is an example of a _______ department.
service
Costs transferred from Department A to Department B _______.
will always be 100% complete with respect to Department A.
The journal entry to record material cost in the second department include a ______ to Work in Process - Department #2.
debit
Conversion costs are ______.
direct labor plus manufacturing overhead
Most large organizations have both ______ departments where the central purposes of the organization are carried out and _______ departments that provide assistance.
operating ; service
The method that provides for allocation of a service department's costs to other service departments, as well as to operating departments, in a sequential manner is referred to as the ________ method.
step-down
Examples of operating departments include:
- Production department at a manufacturer - Geography department at a University - Surgery department at a hospital
FIFO method (of process costing)
- method in which equivalent units and unit costs relate only to work done during the current period - Bases costs solely on the costs and outputs from the current period.
The step-down method begins allocating cos with the department that provides the ______ amount of service to other service departments.
greatest
Under the FIFO method, which of the following inventory balances are used in the calculation of equivalent units?
- Ending Work in Process - Beginning Work in Process
The entry to record the sale of finished foods to customers is _____.
A debit to Cost of Goods Sold and a Credit to Finished Goods.
Direct labor plus manufacturing overhead equals ______.
Conversion Costs
The journal entry to record labor costs in Department #1 is ______.
Debit Work in Process - Department #1 and Credit Wages Payable
The journal entry to apply overhead cost to processing Department #1 is to _______.
Debit Work in process - Department #1 and credit Manufacturing Overhead
Process costing accumulates costs by ______.
Department
Number of partially completed units x Percentage completion =
Equivalent Units
When using process costing, what can be added in any department?
Materials, Labor and Overhead.
Equivalent Units of Production using FIFO
Units Transferred Out + Equivalent units in Ending WIP - Equivalent units in Beginning WIP
When using process costing, a separate _______ account is maintained for each processing department.
Work in Process
The equivalent units completed are valued the same as units _______ for purposes of determining the cost per unit.
transferred out
In process costing, manufacturing overhead costs are ______.
Generally applied using a predetermined overhead rate.
In a processing department, all units of output are ________.
Homogeneous
When computing the equivalent units of production under the weighted-average method, partially completed _______ inventory is ignored.
beginning Work in Process
The two most commonly used methods for determining unit product costs are _______.
Job-order costing and Process costing
True or False: Allocated costs of other service departments are reallocated back to the original service department allocations when using the step-down method.
False
The journal entry to record the transfer of completed units to the finished goods warehouse is to debit ______.
Finished Goods and credit Work in Process.
True or False: The equivalent units of production computed under the weighted-average method does not take into account the percentage completed of the beginning inventory.
True (The equivalent units already include work accomplished in prior periods)
Weighted Average Method
- A process costing method that blends together units and costs from both the current and prior periods.
Companies allocate service department costs to operating departments to _______.
- Evaluate managerial performance - Motivate managers
Similarities between job-order costing and process costing include the _______.
- Manufacturing accounts used - Basic purpose to assign and compute product costs. - Flow of costs through the manufacturing accounts.
FIFO is considered better than the weighted-average method because _______.
- it provides more up-to-date cost data - current performance is based on current period costs
Units in ________ Work in Process inventory + Units started or transferred in = Units in ______ Work in Process Inventory + Units completed and transferred out
beginning ; ending