Chapter 5 Process costing

1. the cost of its ending work in process inventory 2. the cost of its completed units that were transferred to the next stage of the production process.

In process costing what are the 2 numbers should be calculated for financial reporting purposes?

homogeneous

Furthermore, the output of a processing department must be ______________

In Job order costing many different jobs are worked on during each period, with each job having unique production requirements, but in process costing a single product is produced either on a continuous basis or for long periods of time. All units of products are identical

Name 1 difference between job order and process costing

1. In Job-Order costs are accumulated by Individual job, but in process costing costs are accumulated by Department. 2. In Job-Order unit costs are computed by job on the job cost sheet, but in process costing unit costs are computed by department

Name 2 differences between Job-Order and Process Costing

equivalent units

Roughly speaking, the _____________ is the number of complete units that could have been obtained from the materials and effort that went into the partially complete units.

job order costing

Similar to ___________, a shoe manufacturer may charge each batch of shoes for its own specific material costs(e.g., shoes made with expensive leather would be charged accordingly, as would shoes made with inexpensive synthetic materials). This is an example of?

Operation costing

Similar to job order costing, a shoe manufacturer may charge each batch of shoes for its own specific material costs(e.g., shoes made with expensive leather would be charged accordingly, as would shoes made with inexpensive synthetic materials). This is an example of?

Operation costing

Similar to process costing, the shoe manufacturer may accumulate the labor and overhead costs by department and assign the same conversion cost per unit to each shoe regardless of the shoe style. Is an example of?

process costing

Similar to___________, the shoe manufacturer may accumulate the labor and overhead costs by department and assign the same conversion cost per unit to each shoe regardless of the shoe style.

Transferred in

The ______________ costs from Department A are added to the manufacturing costs incurred in Department B.

uniformly

The activities performed in a processing department are performed __________ on all units of production.

cost of beginning work in process inventory + cost added during the period divided by equivalent units of production

The formula for computing the cost per equivalent unit is?

conversion costs

To simplify things, direct labor and manufacturing overhead are often combined into one classification of product cost called ___________

True

True or False In process costing, labor costs are traced to departments—not to individual jobs?

True

True or False to calculate ending work in process inventory and completed units transferred out you have to calculate the unit costs within each department?

True

True or False: After processing has been finished in Department B, the costs of the completed units are transferred to the Finished Goods inventory account

False

True or False: Each department does not need to calculate a separate unit cost for each type of manufacturing cost that it incurs.

True

True or False: Equivalent units need to be calculated because a department usually has some partially completed units in its beginning and ending inventories. These partially completed units complicate the determination of a department's output for a given period, and the unit cost that should be assigned to that output.

True

True or False: Finally, when a customer's order is filled and units are sold, the cost of the units is transferred to Cost of Goods Sold

True

True or False: In process costing, as in job-order costing, predetermined overhead rates are usually used?

True

True or False: Manufacturing overhead cost is applied according to the amount of the allocation base that is incurred in the department.

True

True or False: Once processing has been completed in a department, the units are transferred to the next department for further processing.

True

True or False: Operation costing is a hybrid of job-order and process costing because it possesses attributes of both approaches?

True

True or False: Products in a process costing environment typically flow in a sequence from one department to another.

Direct Materials, Direct Labor, and Manufacturing Overhead travel to work in process and then goes to finished goods and then to cost of goods sold

What are the flow of materials for labor and overhead costs?

processing department

A _______________ is any unit in an organization where materials, labor, or overhead are added to the product.

Units completed and transferred+ Equivalent units remaining in work in process

Equivalent units of production always equals?

11,500

For the current period, Jones started 15,000 units and completed 10,000 units, leaving 5,000 units in process 30 percent complete. How many equivalent units of production didJones have for the period?

Similar and produced continuously

Process costing is used for products that are:

weighted-average method and FIFO method

What are the 2 methods for finding the unit costs within each department?

1. 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. 2. 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.

What are the characteristics of the weighted-average method?

Direct Materials, Direct Labor, and Manufacturing Overhead travel to Jobs then goes to Finished goods and then to cost of goods sold

What are the flow of materials for labor and overhead costs for jobs?

Number or partially completed units x Percentage completion

What is the equation for calculating equivalent units

Debit: Work in Process - Department A and Debit: Work in Process - Department B Credit: Manufacturing Overhead

Write the Journal entry for the overhead cost applied to Department A and Department B.

Debit Finished Goods and Credit Work in Process - Department B

Write the Journal entry for transfers from Work in Process - Department B to Finished goods

Debit: Work in Process - Department A and Debit: Work in Process - Department B Credit: Salaries and Wages Payable

Write the journal entry for labor costs to Department A and Department B

Debit: Cost of Goods Sold and Credit: Finished Goods

Write the journal entry for when finished goods are sold to customers

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

What are the similarities between Job-Order and Process Costing?

Direct Materials, Direct Labor, and Manufacturing Overhead travel to processing department then goes to finished goods and then to cost of goods sold

What is the flow of costs in a process costing system?

Debit: Work in Process - Department A and Debit: Work in Process - Department B Credit: Raw materials

Write the journal entry for the issue of raw materials to the processing department A and Department B.

Debit: Work in process - Department B and Credit: Work in process - Department A

Write the journal entry for transfers from work in process - Department A to Work in process - Department B

FIFO method

__________ calculates unit costs based solely on the costs and outputs from the current period.

weighted-average method

____________ calculates unit costs by combining costs and outputs from the current and prior periods

Equivalent units

_____________ is the product of the number of partially completed units and the percentage completion of those units with respect to the processing in the department.

Equivalent units

______________ Defined as the product of the number of partially completed units and the percentage completion of those units.

Operation costing

________________ is commonly used when batches of many different products pass through the same processing department.