ACCT 3030: Exam 1 Prep: Ch. 4

Hw Bims Corporation uses the weighted-average method in its process costing system. The Assembly Department started the month with 4,400 units in its beginning work in process inventory that were 70% complete with respect to conversion costs. An additional 67,000 units were transferred in from the prior department during the month to begin processing in the Assembly Department. There were 30,000 units in the ending work in process inventory of the Assembly Department that were 60% complete with respect to conversion costs. What were the equivalent units for conversion costs in the Assembly Department for the month?

$59,400

Once the processing has been completed in a department, the units are transferred to the next department for further processing. 1.The following journal entry transfers the cost of the units that have been completed within the formulating department to the bottling department 2. After processing has been finished in the Bottling Department, the costs of the completed units are transferred to the Finished Goods inventory account: 3. Finally, when a customer's order is filled and units are sold, the cost of the units transferred to Cost of Goods Sold:

1. Dr. Work in Process - Bottling Cr. Work in Process - Formulating 2. Dr. Finished Goods Cr. Work in Process - Bottling 3. Dr. Cost of Goods Sold Cr. Finished Goods

What are the 3 similarities between job-order and process costing?

1. Both systems have the same basic purposes: to assign material, labor, and manufacturing overhead costs to products and to provide a mechanism for computing unit product costs 2. Both systems use the same basic manufacturing accounts, including Manufacturing Overhead, Raw Materials, Work in Process, and Finished Goods 3. The flow of costs through the manufacturing accounts is basically the same in both systems.

What are the 4 steps to the weighted average method in the process costing system?

1. Compute the equivalent units of production 2. Compute the cost per equivalent unit 3. Assign costs to units 4. Prepare a cost reconciliation report A separate calculation is made for each cost category in each processing department

process costing

A costing method used when homogeneous products are produced on a continuous basis. -used most commonly in industries that convert raw materials into homogenous (ie. uniform) products, such as bricks, soda, or paper, on a continuous basis

What are the 3 differences of each job-order and process costing?

Job-order: 1. Many different jobs are worked on during each period, with each job having unique production requirements 2. Costs are accumulated by individual job 3. Unit costs are computed by job on the job cost sheet Process Costing: 1. A singe product is produced either on a continuous basis or for long periods of time. All units of product are identical 2. Costs are accumulated by department 3. Unit costs are computed by department

operating costing

Operation costing is a hybrid of job-order and process costing because it possesses attributes of both approaches. Operation costing is commonly used when batches of many different products pass through the same processing department.

How to prepare a cost reconciliation report

Solve for costs accounted for: Cost of beginning WIP inventory + costs added to production during the period = total costs accounted for Solve for the costs to be accounted for: cost of ending WIP inventory + cost of units transferred out = total cost to be accounted for both totals should be equal

Units transferred to the next department equation

Units in beginning work in process + Units started into production − Units in ending work in process

units in ending work in process formula

Units in beginning work in process + Units started into production − Units transferred to the next department

Characteristics of the weighted-average method

a)This method makes no distinction between work done in the prior and current periods. It blends together units and costs from the prior and current periods. b)The equivalent units of production for a department are the number of units transferred to the next department (or finished goods) plus the equivalent units in the department's ending work in process inventory.

How to assign costs to units

add cost of ending WIP for both materials and conversion cost of ending WIP inventory = equivalent units x cost per equivalent units

Conversion cost

direct labor + manufacturing overhead costs Each department needs to calculate a separate unit cost for each type of manufacturing cost that it incures -to simplify things, companies often consolidate cost categories (materials cost, labor cost, and overhead cost) into 2 groups by combining labor and overhead costs into a category called conversion costs

A process costing system is employed in those situations where:

manufacturing involves a single, homogeneous product that flows evenly through the production process on a continuous basis

In process costing, a separate work in process account is kept for each:

processing department

job-order costing

used when many different jobs or products are worked on each period -ex: industries that use job-order costing include furniture manufacturing, special-order printing, shipbuilding, and many types of service organizations

The journal entry to record the materials used in the processing department (formulating department), is as follows: (issue raw materials to processing department of formulating)

Dr. Work in Process - Formulating Cr. Raw Materials

The journal entry to record the labor costs in the processing department (formulating department), is as follows:

Dr. Work in Process - Formulating Cr. Salaries and Wages Payable

The journal entry to record the overhead cost applied in the processing department (formulating department) is as follows:

Dr. Work in Process - Formulating Cr. Manufacturing Overhead

How to compute the equivalent units of production

Equivalent units of production = units transferred to the next department or to finished goods + equivalent units in ending work in process inventory (**units in beginning work in process inventory + units started into production = ending EIP inventory + units completed and transferred out) use the % from the ending work in process inventory x the units in ending WIP to find equivalent units of production

How to compute the cost per equivalent unit

cost per equivalent unit = (cost of beginning WIP inventory + cost added during the period) / equivalent units of production equiv. units of prod --> found in step 1 numerator = blending the costs and outputs from the current and prior periods = total costs