ch 4 learn smart

what can be added in any processing department when using process costing?

materials, labor and overhead

Equivalent Units =

number of partially completed units X percentage completed

methods that ignore the allocation base attribute to the service department whose cost is being allocated

step down method and direct method

When allocating cost the step down method begins with

the service department offering the greatest amount of service

Formula for cost per equivalent unit using the weighted average method

(cost of beginning WIP inventory + cost added during the period) / Equivalent units of production

order in which cost flow

Raw materials; WIP; Finished Goods; Cost of Goods sold;

conversion cost =

direct labor cost plus MOH cost

Which methods can be used to allocate service department cost to other departments?

direct method; step-down method; reciprocal method;

to report ending inventory partially completed units are translated into

equivalent number of fully completed units

Under the FIFO method both beginning and ending inventories are converted to

equivalent units basis

service department cost are included in

overhead cost of operating departments

Journal entry to apply overhead cost to processing Department #1

Debit WIP department #1 Credit MOH

What type of product are in a process department?

Homogeneous; identical units;

direct method

allocating service department cost ignores services provided by one service department to other services

similarities between job order and process costing

assign material, labor, and manufacturing overhead cost to products and to provide a mechanism for computing unit product cost; use the same basic manufacturing accounts including MOH, raw material, WIP and finished goods; the flow of cost through the manufacturing accounts is basically the same in both systems

process cost product examples

cereal, gas, sunscreen

Difference between FIFO andweighted average method in process costing

computation of equivalent units; the way in which cost of beginning inventory are treated;

FIFO method Cost per equivalent unit =

cost added during the period / equivalent units of production

under the FIFO method the cost associated with transferred out units

cost of units started and completed during the period; cost in beginning WIP inventory; cost to completed beginning WIP inventory;

journal entry to record direct labor cost in processing

debit WIP; credit salaries and wages payable

to record sale of goods in a jornal

debit cost of goods sold and a credit on finished goods

Differences in job order costing and process costing

process costing is used when companies produce a continuous flow of units that are indistinguishable; job order costing is used when a company produces different jobs for a unit product; under process costing there is no sense to identify materials, labor, and overhead cost with a particular customer order; process costing systems compute unit cost by department as job order costing is by job on the job sheet

Examples of operational departments

production department at a manufacturer; geography department at a university; surgery department at a hospital;

Characteristics of operation costing

products are processed in batches; cost are accumulated by department

which type of department provides assistance to the operating departments?

service

interdepartemental

services between departments

the flow of cost through manufacturing accounts is basically the same for job-order costing and process costing

true

process costing and job order costing have the same basic purpose. What is a key difference between the two systems?

under process costing it makes no sense to try to identify materials, labor and overhead cost with a particular csutomer

process costing

used in industries that convert raw materials into homogeneous products.

method that equivalent units of production equal number of units transferred to the next department plus equivalent units in ending WIP

weighted average