managerial accounting chapter 4

1.a 2.c 3.d 4.b

*in order: (a) compute the equivalent units of production (b)prepare a cost reconciliation report (c) compute the cost per equivalent unit (d)assign costs to units

essential features of processing departments (2)

1. activity in the processing department is performed uniformly on all of the units passing through it. 2. output of the processing department is homogeneous; in other words, all of the units are identical.

job-order costing process costing

___________________________(3 words) and ______________________ (2 words) are two common methods for determining unit product costs

finished goods

after further work in the second processing department, units are then transferred to _________________ (2 words)

processing departments

an organizational unit where work is performed on a product and where materials, labor, or overhead costs are added to the product

material, labor, and manufacturing overhead costs

both job-order and process costing have the same basic purpose: to assign __________________, ________________, and _______________________ to products and to provide a mechanism for computing unit product cost.

manufacturing overhead raw materials work in process finished goods

both job-order and process costing use the same basic manufacturing accounts like:

FIFO

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.

process costing

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

conversion costs

direct labor cost + manufacturing overhead cost

processing

materials, labor, and overhead costs can be added to any _______________ department - not just the first. (costs in 2nd process. dept. work in process account consist of M, L, and OH costs incurred in 2nd process dept. plus the costs assigned to the units transferred from 1st process. dept.)

equivalent units

number of complete units that could have been obtained from the materials and effort that went into the partially completed units.

equivalent units

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

2

regardless of the number of processing departments, they all have _______ (#) essential features.

true

t/f a separate work in process account is maintained for each processing department.

true

t/f both job order and process costing: 1. have the same basic purpose 2. use the same basic manufacturing accounts 3. flow of costs through the manufacturing accounts is basically the same in both systems.

true

t/f each department needs to calculate a separate unit cost for each type of manufacturing cost that incurs.

true

t/f in a job-order costing system, the entire company may have only one work in process account.

false (many different jobs are worked on during each period, with each job having unique production requirements. this is true for process costing)

t/f in job-order costing, many different jobs are worked on during each period, but each job is identical

true

t/f operation costing is a hybrid system that employs aspects of both job-order and process costing.

false (it is transferred)

t/f the completed production of the first processing department is not transferred to the work in process account of the second processing department.

true

t/f units in beginning work in process inventory + units started into products or transferred in = units in ending work in process inventory + units completed and transferred out.

true. (costs are accumulated by department in process costing)

t/f with job-order costing, costs are accumulated by individual job.

false (unit costs are computed by job on the job cost sheet. this is true in process costing.)

t/f with job-order costing, unit costs are computed by department on the job cost sheet.

job-order costing

type of costing that is used when many different jobs or products are worked on each period.

cost per equivalent unit

= (cost of beginning work in process inventory + cost added during period) / 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

operation costing

A hybrid costing system used when products have some common characteristics and some individual characteristics. (shoes)