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