Accounting II - Smartbook 4

The journal entry to record the transfer of partially completed products from processing Department #1 to processing Department #2 is to debit Work in Process Department:

#2 and credit Work in Process - Department #1

Direct labor plus manufacturing overhead equals ______ cost.

Conversion Cost

Job-Order costing

When many different jobs or products are worked on each period.

When unit costs are transferred from Department A to Department B, Department B will treat cost as:

- Transferred in

The equivalent units completed are valued the same as units ______ for purposes of determining the cost per unit.

- Transferred out

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

True or False: The flow of costs through manufacturing accounts is basically the same for job-order costing and process costing

- True

Which of the following equations is correct?

- Units in beginning WIP + units started or transferred in = Units in ending WIP + units completed and transferred out

The difference in the treatment of costs transferred in from Department A to Department B when compared to materials and conversion costs is that costs transferred in:

- Will always be 100% complete with respect to Department A

When using process costing, each processing department has a separate _____ ______ ______ account.

- Work in process

The journal entry to record labor cost in the first department would be to ______ (debit/credit) wages payable and _____ (debit/credit) Work in process- Department #1

- credit: Wages payable is a liability which is increased with a credit - debit: Work in process is an asset account which is increased with a debit

In process costing, manufacturing overhead costs are:

- generally applied using a predetermined overhead rate

When using process costing, which of the following can be added in any department?

- Materials, Labor and overhead

Work is performed on products, and materials, labor, and overhead costs are added to products in a(n) ____ department.

- Processing

Which of the following is not a characteristic of operation costing?

- Products are homogeneous

Industries/products more suitable for process costing than job-order costing include:

- Sunscreen - Paper towels - Flour

When ending work in process contains 500 units that are 34% completed, there are ______ equivalent units.

- 170 Units 500 x 34% = 170

FIFO method

- Bases costs solely on the costs and outputs from the current period.

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

Units in ____ work in process inventory + units started or transferred in = Units in ____ work in process inventory + units completed and transferred out

- Beginning - Ending

Costs per equivalent unit are used to value:

- Both units in ending inventory and units transferred to the next department

Examples of products that may use operation costing include:

- Clothing - Shoes - Jewelry

Weighted-average method

- Combines costs and outputs from the current and prior periods.

Characteristics of operation costing include:

- Costs are accumulated by department - Products are processed in batches

The correct journal entry to apply manufacturing costs to processing Department #1 would be to _____ Manufacturing overhead and _____ Work in process - Department #1.

- Credit - Debit

The journal entry to record material cost in the second department would include a _____ (debit/credit) to Work in Process - Department #2

- Debit

The journal entry to record the transfer of completed units to finished goods would be to ____ (debit/credit) Finished Goods and ______ (debit/credit) Work in Process.

- Debit - Credit

The journal entry to record direct labor costs in processing Department #1 is debit:

- Debit Work in process - Department #1 and credit Salaries and wages payable

Process costing accumulates costs by _____.

- Department

Operations costing is similar to job-order costing because:

- Each batch is charged for its own specific materials

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

A processing department produces _____ units .

- Homogeneous - Identical

When using process costing, materials can be added ____ processing department.

- In any

When many different jobs or products are worked on each period, the most likely costing system used is:

- Job-order

The two common methods for 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 operation or department

Similarities between job-order costing ad process costing include the:

- Manufacturing accounts used - Basic purpose to assign and compute product costs - Flow of costs through the manufacturing accounts

Number of partially completed units x Percentage completion =

Equivalent Units

Process Costing

Most commonly used in industries that convert raw materials into homogeneous (i.e. Uniform) products ex: Bricks, soda, or paper on a continuous basis