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
